You own a property. You can sell it or rent it. You are not going to live in it yourself so, apart from leaving it empty, you only have those two choices.
It is a big decision. Many people make what they see as an easy decision based on how they came to be the owner. They may have inherited it, so it may have some emotional ties for them and their family. They may simply have had a job transfer and moved out of town. They may have received it as part of a divorce settlement. Each situation brings different factors into the decision. And each situation also brings its own hassles, pressures, and emotions regardless of property ownership.
It feels like an easy decision, “to rent it out until we are sure.” It is also easy to look ahead a little and see possible interest rate increases coming down the pike. When mortgage rates go up, fewer people can afford to buy, so they are more likely to rent, so renting the property looks like a good idea. If mortgage rates go up, home prices go down, so renting it makes sense until the market picks up. They are easy decisions and they are decisions that owners often regret. It is as true of being a landlord as it is of many things – the devil is in the details.
Rent it Yourself or Use an Agent
Again, you have two choices. Many owners take the “do-it-yourself” route because they have heard the horror stories about agents who “did not do their job properly.” Real estate is a complex line of business. It is erratic in terms of demand from would-be buyers or tenants. It is filled with buyer and tenant emotion because it is potentially their new home they are looking at. And it is a business filled with part-time agents who, no matter how well-intentioned they are, can only be available to find a tenant, interview them, handle the background checks and the walk-throughs, and everything which property management involves in the evenings and weekends.
So, many people decide to become their own part-time property manager. You do not need a real estate license to rent out your own property, and “if we find the right tenant, all will be OK” as many owner-landlords say to themselves.
Learning on the Job
Advertisements go into the press, websites sell well-designed rental property pages, neighborhood websites get read by folk looking for somewhere to live, so it is not too long for potential tenants to raise their hand.
The new landlord knows there is a process to follow, so reads up on the subject. It is important to meet the prospective tenants, show them the property, discuss it with them, do a background check, download a rental agreement, and all should be well.
Advertising the Property for Rent
Advertising the property is the first potential pitfall. The Federal government and State governments have laws that say what can go into an advertisement or, more precisely, what cannot. Not knowing the law is no excuse. The Federal Fair Housing Act makes things very clear about what a landlord can and cannot do, but is less clear on how to do it.
Meeting with tenant applicants is the next potential pitfall. Let us say the landlord meets the first tenant applicant at the property and begins the tour. As part of the “getting to know you” conversation the landlord asks if they have children. They do, and the landlord says the neighborhood is great for kids. They view the property, and say the would like to take it further.
The next tenant applicant arrives. It’s late, the landlord feels thirsty from all the talking, so offers to make this visitor a coffee. The first visitor did not get offered a drink. The conversation begins, and the landlord follows on from the previous conversation and says that the neighborhood is great for kids. This tenant does not have children.
The landlord has now possibly contravened the Federal Fair Housing Act twice. Really? Yes! Telling the second tenant that the area is great for kids could be interpreted as “discrimination based on familial status.” The first person was not offered a drink, but the second one was. Was it just because the landlord was thirsty, or did it have something to do with the fact that the first visitor was from a foreign country and had just moved into town?
But it was just conversation! To the everyday person, yes it was just conversation, but the Federal Fair Housing Act says it may be discrimination. Now here is the problem, the property cannot be rented out to both applicants, and if the unlucky applicant felt disappointed, then they may hire a lawyer to pursue their case for compensation.
It is essential for landlord peace of mind to carry out background checks on tenant applicants. Landlords have a right to choose a tenant they believe will pay their rent on time, look after the property, and not behave in ways that may anger other residents. To learn enough about applicants, they carry out background checks.
The checks include such things as:
• Credit score.
• History of paying debts on time, not having any liens against them, not having any forced account closures, etc.
• References from previous landlords, current employer, etc.
• Any criminal history (both state and federal.)
• Any history of drug or alcohol dependency.
Landlords must seek permission for such checks, must complete the requests correctly, and must handle the responses correctly. In some states, for example, it is forbidden to seek the source of income. Knowing who can be told about the results of criminal or other history is also essential. By not following the rules, the landlord is liable for a claim.
It is illegal to discriminate against someone with a previous drug addiction, for example, if that applicant has completed or is actively involved in a rehabilitation program. Worrying that the applicant may fall back into old ways and wanting to charge a higher rent to cover any potential damage is against the law. Not renting the property to that person but renting it to someone else is a landlord’s right, but all of the correct steps must be taken to avoid a potential claim for discrimination.
Being a first-time landlord may seem like an easy decision and an obvious route to follow. But the route has pitfalls. There are successful landlords who never took a misstep, and others who learned from their mistakes. The details set by federal and local laws can be cumbersome, and finding the right property manager can be difficult.
The best decision, therefore, may be to sell quickly, simply, and for a fair price. Click here to contact Seller’s Advantage online or call us at 1-800-208-3243 to get a no-cost, no-obligation quote on your home. We purchase homes in AS-IS condition and can give you a cash offer in as little as 24 hours.