Good morning to all, and welcome again to Saturday Morning Home Repair - LIVE! A weekly gathering of professionals, DIY'ers, hopeless attempters....and the occasional redneck or two. Any questions asked can often be answered, or at least we can try to point someone in the right direction. At the very worst, always make sure to have the duct tape handy.
My house is a 2-family built sometime around 1915, originally with an outhouse (long since replace by a detached garage), and the only source of heating being the kitchen stove. A century's worth of updates later, I live on the first floor and rent the second, with the tenants unfortunately having to park on the street in front of the house. Since I bought it 5 years ago, all the wiring and most of the plumbing has been updated to modern standards....but don't ask about wall insulation.
Which is what makes renting the apartment somewhat interesting. Everyone wants all the modern conveniences, but at the end of the day the house is 100 years old. The response when I listed it was a bit overwhelming, but that has as much to do with location and heat included as anything else. Deciding rent price, what amenities (if any) to include, and what type of tenant to rent to was the real challenge. Part 1 was about the house itself, but the real fun comes when dealing with tenants.
So let's play "Who Wants to be a Landlord?" in 3....2....1....Snausages!
After spending the entire summer working on the apartment until 4AM (and then staying up all day with a 3 year old), I was finally left with a big, open, fresh-looking....empty space. The kind that doesn't generate any income. Definitely NOT the reason I bought a multi-family.
And so it came time to list it for rent. Before doing so, the wife and I sat down and figured out how much (based on local market and our mortgage), what to include, and get a rough idea of what type of people we wanted to rent to. While the previous tenants were long time friends of ours, the new people would be complete strangers. Since we live here as well, that came as a bit of a sobering thought, but one we always knew would eventually happen.
We immediately ruled out two types of tenants: those with kids under 6, and elderly. Although there's no lead paint in the apartment itself, I can't say the same for parts of the exterior, and definitely don't need a lawsuit because Little Johnny didn't listen to mom and ate paint chips anyway. And while an older tenant may be a safer bet rent-wise, it's a second floor walk-up in New England. Getting sued for a broken hip during a blizzard is not altogether appealing. Under no circumstance do you ever mention who you wouldn't rent to in an advertisement; that opens you up for a discrimination lawsuit.
But there are also Rules of Consideration for tenants that we followed.
1. Any tenant can sue you
Everything about being a landlord is based around liability. At the end of the day, it's an old house, and anything can happen at any time. This means you not only have to repair whatever just went wrong, you're also responsible for any damage to their property. Add the possibility of personal injury for any reason, and it can be a real headache (and bankruptcy) if you attempt property rental without being prepared. Always have an official lease for your state, make sure it allows a rider, and make sure the tenant gets a copy of all paperwork. Granted, a really good lawyer will always find a loophole that allows a tenant to win in court against a landlord (at least in Massachusetts), but try to legally protect yourself, in writing, as much as possible.
2. Tenants are people - and people are DUMB
Which is why you always (if your state allows) take a security deposit equal to one month's rent. Nobody ever intends to put a hole in the wall while moving furniture, but it happens. As does tripping over stuff, dropping stuff, breaking glasses....there are days where clutzy doesn't begin to describe me, and I assume everyone has a day like that periodically. Over time, the place will get damaged; it's just the nature of the beast. After all I've put into the place I may cry because of the damage, but I can't get mad at tenants for being human.
3. Find people you get along with
This isn't to say "try to find a new best friend", but if you live in the same building, you're going to run into each other. My wife and I can probably trace our genealogy back to Snow White, so we didn't want to rent to some gansta rappers or something. Sooner or later you'll have to talk to the tenants in the yard or doing laundry, so making sure it's someone you can actually converse with is a good idea. Thankfully, I also avoiding renting to any TeaBaggers!
4. Use a rental application
Most applications explicitly state that you have the right to do a background check, and allow you to take the ID number and DOB of anyone who wants to rent. In Massachusetts, this means I can run a CORI (Criminal Offender Record Information) search on any applicant...if I want to pony up the money for each person, and go through miles of red tape. I spent years renting out storage units and business spaces, so I like to think I have a pretty good "spidey-sense" for people, and Google doesn't hurt (not to mention it's free). That said, if you ever have any misgivings about a potential tenant that you otherwise like, run the search for your own piece of mind.
5. Have a complete lease rider
The lease deals specifically with legal stuff, include statute numbers and allowable timeframes for lapses in rent. The rider is property specific stuff; how many cars they can have on property, which areas are strictly off-limits, pets, etc. The wife and I spent the majority of a day authoring the rider, just adding things as we thought of them, and it damn near went to two pages. But, because all the rules of the road were laid out for the tenants before they moved in, we've already avoided a situation or two. Lay it all out in writing, make sure you and they sign it, and make DAMN sure they get a copy.
6. Beware the DIY'er
Yes, that is an incredibly ironic statement to put on SMHRB, but there's a reason. Let's pull out the Universal Translator from Star Trek and plug in a rather innocuous statement.
"Do you mind if I redo a room or two?"
Lights flash, beeps sound, and a minute later we have the real translation.
"I'd like to own a house someday. Do you mind if I practice on yours?"
You have been warned.
And now probably the hardest, yet most important rule regarding tenants.
7. You are not their friend
Even after interviewing dozens of applicants and deciding who to rent to, there is always the underlying business element. I didn't buy a rental property to be someone's saviour. The rental income is what allows me to stay current on my mortgage while staying home with a kid (soon to be 2 kids). While the wife punches the corporate timeclock (which I still can't believe she opted for), my job is to be the landlord. That means I do the repairs, deal with tenant issues, collect rent...and am always prepared to evict a non-payer, regardless of any sob story. You have to put aside the desire to help people in a bad situation, and be ready to pull out a nasty meanstreak if necessary.
Over the years I've had to auction dozens storage units of people that contained literally everything they owned. I hated doing it, but that was the job. Since non-payment of rent would actually now threaten my mortgage...well, let's just say I wouldn't hesitate to evict a deadbeat. Being able to flip the switch from friendly to all-business is an absolute necessity.
So, there it is. If you or anyone you know is considering a rental property for additional income, carefully consider everything here and in the previous posting on the subject. While steady, monthly income is a beautiful thing, there are headaches that go with the proposition. Hopefully everyone thinking about a rental property can now make a more informed decision.