Buying rental properties is the first step in becoming a landlord, but you must also rent your investment properties. There are many ways to rent a home. In this article, I break down exactly how I advertise and pick a tenant as well as how I write a lease. I will also go over how I decide market rent which is another very important piece of investing in long-term rentals. If you need to know how to rent a home fast, continue to read.
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How can landlords determine rental rates?
Determining market rent should be done well before you are ready to rent a house and one of the first things you do as a real estate investor.
It is tricky to tell people exactly how to determine market rental rates because each market uses different techniques to rent homes. Some markets primarily use the MLS to rent homes, while other markets like my market, hardly use MLS at all. In my market, Craigslist is the primary method to rent a home and the best way to determine rental rates.
How can landlords determine rent rates with Craigslist?
When I am trying to determine rental rates, the first thing I do is pull up properties for rent on Craigslist. I browse Craigslist to see what is in available in the neighborhoods that are most similar to my property, with the same amount of bedrooms. I don’t look at the most expensive rentals, I look for homes in the lower end of the price range. Be careful if you see an incredibly low-priced rental, it may be a fraudulent listing trying to get people to mail money to Nigeria. I ignore any ads that seem way out of line with the other rentals.
Looking at ads on Craigslist is only the first step, but these are just asking prices. To see what is actually renting, it takes a little more work. Print or write down the ads that are the most comparable to your property. Wait three days, and then check to see if the ads are still on Craigslist. If the advertisements are gone, then those houses were probably rented. If they are still up then they probably have not rented. Check again in a week to see which ads are still there and which are gone. If you want to take one more step then call the numbers or email the ads that you first printed and ask if the properties are still available.
To avoid tenant problems, proper screening is vitally important and we now use SmartMove for credit and background checks.
How to price a rental property
I have tried a couple of different methods of pricing my rentals.
1. Price at the top of the market and try to find a renter who will pay a premium.
2. Price a little below market and take my pick of great renters.
My experience has been better with taking my pick of great renters. Even though the rent is lower, I usually have a lot less to worry about like late rent or excessive wear and tear. Whenever I price a rentals high, I am waiting for a decent to mediocre candidate to send an application in, instead of picking the best tenant from many applications. Here is a great article on the best way to manage a property after it is rented.
How can landlords advertise a rental property
Once I have a decent idea of the market rent, I place an ad on Craigslist, put a for rent sign in the yard and post it on Facebook. I don’t post in my MLS because very few people look for rentals with an agent in my area. Other areas of the country primarily use MLS or another method to advertise rentals. Be sure you research what the most prominent way to advertise rental properties is in your area. I would also post your rental on Zillow Postlets.
How to create an application for a rental property
I use an application I found online and altered slightly when I am looking for potential tenants. I used to not charge an application fee or run a credit check but I do now. I charge $50 for an application fee and I use that money to run a credit check. Potential tenants have had no problem paying these application fees, and it helps make sure all tenants submitting an application fee are serious.
A great way to judge a tenant is by talking to them as much as possible and looking at their application. I want to see an application that is filled out as much as possible with multiple references. If an application is barely filled out, then the potential renters aren’t taking the process seriously or they are trying to hide something.
When I talk to a potential renter, I want to learn as much about their previous living situation as possible, I ask about pets, I ask about employment and who will be living in the property. The longer you talk to a tenant, the more you can learn about them. When you first talk to a tenant on the phone, take notes so you remember what they said. Then when you meet them in person, ask them some of the same questions to make sure they give you the same answers. If someone is lying to you, it is a very bad sign.
How to check references on a potential tenant
I always call references for all applicants that I am considering renting to. I want to talk to the reference for the applicant’s previous residence and their current employer. I want to know if they paid rent on time, took care of the residence or were high maintenance. By high maintenance, I mean calling in every week for minor issues, causing plumbing problems because their children like to flush toys down the toilet or any number of other items. I want to see if they had pets, and if that information matches up with what they are telling me on their application.
I want to ask the employer how long they have worked there. I want to know if they are a good worker and how solid their position is. I will also ask how much money they make to see if it lines up with what the applicant is telling me.
Should you allow pets in your rental property?
Pets can be an extra source of income or destroy your house. I prefer not to allow pets at all, but I may allow one dog with an additional pet deposit or an increase in rent. I usually charge a $200 non refundable pet deposit for a small dog. I always want a pet reference as well, meaning they had the pet in their previous residence and the pet did not hurt the property.
I do not allow cats, cats can ruin a house quicker than anything. If you haven’t smelled cat urine in a house , it is not pleasant. At a minimum you have to remove all carpets and padding and in some cases remove the sub floor as well.
I am also careful about what types of dogs I allow, as some towns outlaw certain breeds. Here is a much more detailed article on pets.
Should you allow smoking in rental properties?
I do not allow smoking in my rental properties at any time. If anyone is caught smoking or breaking any of the other rules, the lease says I can fine them $750 per occurrence.
How to write a lease after you rent a property
I am lucky that I have a sister who is a property manager. I was able to use her lease and customize it for myself. Everything needs to be in writing including rent, term, late fees, the date rent is due, and things the tenant can and can’t do. A few things I include that cannot be done.
1. No painting without written approval.
2. Do not hang curtain rods without written approval.
3. No smoking on the property.
4. No pets on the property.
5. Only people on the lease and their children may live in the home.
6. No overnight visitors for over three straight nights.
7. No illegal activities in the property.
If any of these rules are broken, the lease says I can fine the tenants $750 per occurrence. If there are any exceptions to these policies, I put them in writing in additional provisions in the lease.
I have a section that shows what utilities are paid by tenants, in my case all of them.
I have a section that says if the tenants break their lease early, they owe the remainder of the rent due for the entire lease. If I can rent the home again, I can’t charge the previous tenants for rent as well, but I will charge a one months rent lease-break fee.
I have many other items in the lease. I am not an attorney and I highly suggest you have an attorney look over any lease you create.
Lead based paint disclosure in rental properties
With any house built prior to 1978, I have to provide a lead based paint pamphlet explaining the dangers of lead based paint. I also have a lead based paint disclosure signed by the tenants as well.
Deposit on rental properties
I charge one month’s rent for the deposit, and it must be paid with the first month’s rent before the tenants move in. The only time I split up the rent and deposit is if the tenants want to reserve the home before they move in. They can pay the deposit first and then pay rent when they move in.
For more information on how to buy the best rentals, which will make the most money, check out my book: Build a Rental Property Empire: The no-nonsense book on finding deals, financing the right way, and managing wisely. The book is 374 pages long, comes in paperback or as an eBook and is an Amazon best seller.
Carbon monoxide detectors and smoke detectors in rental properties
Each state has different laws regarding carbon monoxide detectors and smoke alarms. No matter what your state law is, I would put them in. In Colorado we have to have carbon monoxide detectors within 15 feet of every bedroom. They are very cheap for the protection they offer, and you can plug them straight into an outlet.
Property management can make renting a home much easier
If you want to have a hands off investment, you could always hire a property manager and have them take care of all of this. Right now I manage all of my rentals, but I do plan to start a property management business so someone else can deal with the tenants and keeping track of everything. I have a great article on how to find a property manager here.