So you’ve had your property up for sale and you just cannot get it sold. And while you prefer not to become a landlord, you are thinking that renting it out for a while may be the best option – at least you would have some money coming in. You have become an “accidental landlord.”
Let’s touch on a few issues herein to give you some guidance on how you might want to proceed if you are in this situation. You will need to think it through and make the decision that’s best for you….but let’s consider your options.
Re-Quadruple Your Efforts to Sell the Property
First, give it one more “college try” to get your property sold. Maybe lower the price and/or do a short sale. Has your real estate agent offered a bonus to the buyer’s agent? Are you helping by keeping the house clean and available for viewing? Doing enough advertising? And make the property appealing to a buyer – maybe with a credit for new flooring or appliances? These all cost money, sure, but otherwise, you’ll end up being a landlord.
It’s especially important to step up your efforts if you’re moving out of town — you really don’t want a rental property so far away. So, re-quadruple your efforts to sell the property first, while you move forward with the options below.
The Landlord Option Seems Inevitable
Since you’ve had no luck selling it, let’s make some some smart choices that will help you in your first landlord assignment. You have two choices:
- Having the Property Professionally Managed – Recommended!
- Renting and Managing it Yourself – Not Recommended!
Since you do not have experience with this, hire someone to manage it for at least the first year(s). Typical cost should be 7-10 percent of rental income, plus re-rental fees for new tenants. When that happens, the management company can advertise it, show it, take rental applications and do credit checks, draft the lease, do the proper move-in and move-out procedures – so you don’t have to. Trust me, they work hard for their money. And if you work full time, you’re not handy, you’re moving out of the area, or have never been a landlord before – a professional property management firm is the way to go.
Make sure to interview several management firms, get references, call them, and review their insurance. Don’t forget: you get what you pay for!
One thing you can and should do to help, is place rental ads yourself for your property – just put the management company’s telephone number on them. Flood the Internet with ads and include nice pictures on Zillow, Craigslist, etc. – it certainly can’t hurt, and most sites charge very low prices, or are free!
Managing yourself can work well too, just make sure to educate yourself as much as possible. A few items to consider are the time it takes to show the property, draft a lease and get it signed, and evaluate potential tenants based on their credit, income, legal and rental history. Talk to experienced property owners to learn the ins and outs. Then monthly, you must collect rental checks, pay bills and handle issues about six times a year. It can be a lot of work – but you will learn over time what works for you.
Overall Rental Property Ownership
The key to making life easier and earning money is to get good tenants to stay. Landlords, and accidental landlords, do this by keeping properties in good shape, handling issues when they arise, and treating tenants with respect. It also helps to ask market rents or even a little less, to get a better selection of quality renters. All of the above are what most long-term, individual rental property owners have learned over the years.
Consider these options and educate yourself as much as possible to make the right choice for you – America’s newest accidental landlord.
Leonard Baron, MBA, CPA, is a San Diego State University Lecturer, the author of “Real Estate Ownership, Investment and Due Diligence 101 – A Smarter Way to Buy Real Estate”, and loves kicking the tires of a good piece of dirt! See more at ProfessorBaron.com.