Tips on Starting a Rental

Hey everybody, this is Beth Helvey with Couture Real Estate. I hope you're doing good today. So I'm sitting in my kitchen and you can see that it's kind of chaotic. My bookcases are empty. I've got stuff on my kitchen table. I've got packing paper right there. And that is because I am getting ready to move. I am gonna be moving out of my townhouse in about three weeks. Now I'm doing something with my townhouse. A lot of people are doing, I bought my townhouse in 2020 and a lot of people who bought or refi in 2020 are holding onto their properties because the interest rates are so ridiculously good. And I am one of those. I'm gonna rent this out. So today we're gonna talk about rentals. Now there's two things you can do when you rent. You can manage it yourself or you can hire someone to manage it for you.

And I wanna go over both of those options and some things that you kind of need to know. Now, I'm gonna be renting it out myself, and this is gonna be an annual rental because of the HOA bylaws. Do not allow for V R B O or Airbnb here. So mine's gonna be an annual rental. One of the things you wanna do that I really think if you do nothing else, if you do nothing else, make sure you do this. Have an attorney review your tenant contract. Do not go to Staples or online and download whatever generic contract they have. And I'll tell you why. I knew somebody who several years ago, owned rental property, got a generic Staples contract, and it allowed that person's tenant to not give notice when they were leaving and it really upset the person knowing the property. If it's not in writing that it doesn't count, it doesn't happen.

It has to be in writing. Okay, so a few things that you wanna do when you talk to an attorney. Some things you wanna include is what is your deposit gonna be and under what terms is it gonna get returned and when and how. The notification process, the, uh, dispute process if there is going to be one. You need to have that detailed out when they're moving in, when they're moving out, if your community and uh, allows pets, and if you want them to be allowed to bring their pet, what kind of pets? There's mine. What kind of pets under what circumstances and what kind of a pet deposits are gonna be. And there is a growing movement of people who allow pets that they're charging a daily pet fee. It's like $25, but it's basically a pet rental. So Fido is gonna be renting the house too.

Need to have that detailed out, um, what the Hom condo rules are as they apply to your tenant parking and parking rules. Um, how are they allowed to park? Where are they allowed to park in That sort of thing is you don't want any of this coming back on you, especially if you are living in an HOA community. What's a situation with the keys to the property, which is the front door keys, the garage keys, the side keys, the gate keys, whatever keys you have, the mailbox key. If there's a mailbox key as well as the amenities, your pool, your clubhouse, whatever the case may be how the lease is gonna terminate. So if your tenant is going to remain for a second year, what kind of notice do they have to give you if your tenant is going to break their lease, not break their lease, but if your tenant is going to not extend their lease, what kind of notice do they have to give you?

If you are not going to allow your tenant to continue the lease at the end of their term, how are you gonna notify them? You need all of that in writing. Otherwise, trust me, when people leave and when they come back, or excuse me, when people leave tenancy situations, either as a landlord or a tenant, sometimes that kind of gets ugly. Um, property care. Who's gonna take care of the lawn? Who's gonna change out the AC filters? Who's gonna take care of all that stuff? Is it included in their lease? Um, is your tenant expected to cut the grass? Is your tenant expected to change out the AC filters? If so, how often are you providing the AC filters or do they have to provide them themselves? All of that needs to be spelled out. The care of the property specific to the property in the community in which it remains it resides.

Now you'll also need to have a separate bank account for escrow that the security deposits you take need to be kept in a separate escrow account. And if you decide to put it into an escrow account where you're going to be getting any kind of interest rate on that, you have to disclose it. I also strongly, strongly suggest that whatever you're taking in rent, you set aside, you pay the bills that you need to pay, you pay your mortgage if you have one, you pay your HOA or condo fees, whatever fees you have to pay. And then you take the rest of that money and you set it aside because stuff is gotta happen. I promise you may have a wonderful tenant and they may be really, really awesome, but their kid breaks the dishwasher, which means that when they move out, you may have to buy a new dishwasher.

So keep that stuff in mind and don't get stuck having to pay fees that you weren't expecting cuz you didn't save your money. Save your money. This is a long term game, okay? It's to, it's to your benefit to save the money. Now if for some reason you decide that you're gonna hire a rental company, which is a possibility, we've got a lot of good rental companies here in town. Here are the things you need to know. They're gonna take anywhere from 10 to 20% of the rent amount depending on how often the turnover is. The lease amount of turnover, they will take the least amount of money. If you're writing a weekly Airbnb or something like that, they're gonna take more because it's a lot more work. Um, they typically also have around $300. Different companies are different in discretionary funds and that's in case they have to call a plumber out to, you know, fix a dripping pipe or they have to rekey something and things like that. That is all in case of that and it's at the agent's discretion. Now what'll happen is if anything happens over that, like an appliance breaks or the AC needs to be serviced or something of that nature, they will call you and say, Hey Mr./Ms. Owner, this is what's going on. We need your permission to continue forward. They won't just willingly spend your money and then send you a $6,000 bill. They won't do that. One of the nice things about having a rental company is those calls in the middle of the night, my Toyota's running, I can't get into the house, the dog next door is barking. People are weird. You're gonna get strange calls, but they usually have a service or a way for tenants to reach out with that information so that they're not reaching out to you. If that's one of the things that bothers you, or if you feel like you have to answer the phone in the middle of the night, then you may wanna consider hiring a rental agency. It's also that someone that will take care of their repairs, their complaints, they'll be that buffer.

So your tenants don't know where you are. For example, an appliance isn't working. They'll take care of hiring somebody to get somebody out there to repair or replace it. If the AC needs maintained, uh, they'll make, they'll make plans with the tenants to make sure that the AC repair person can get in and take care of it. All sorts of things like that. They'll be your buffer if you don't actually wanna deal with someone, and that is something to consider a lot of people self-manage and then start off that way. If you are in town with your property, you may be able to do that. If you live out of town, out of the city that your property resides in, you're not close, you may wanna start with consider having somebody here with boots on the ground to maintain your property.

And you can always go back and forth. You know, if you start off managing yourself, you can always hire a company and vice versa and all that sort of thing. So those are some things to consider and I am encouraging people who bought their property that have a phenomenal interest rate. I am encouraging them to hold onto their house if they can because then you can actually, um, work on building your wealth. You can work on having wealth in the future. You can always sell the house down the line if you need to, if you need to take that chunk of money out. But the interest rates around 2020 were so good that if you refi or purchase, if you at all possible can hold onto your property and turn it to a rental, I'm strongly encouraging you to. So I hope you enjoy this. If you have any questions, please feel free to leave it in the comments. Um, I'm happy to answer any that I can or we're free to somebody who has the answer. It's beautiful today. It's on the cool side. So if you have the opportunity to get outside and enjoy the sunshine, please do show, uh, wear your sunscreen, drink a lot of water, and I will talk to you soon. Bye everybody.