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Becoming a Landlord 101
Old 02-13-2014, 07:38 AM   #1
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Becoming a Landlord 101

Hello, All--

Last month I started a thread "Need LTC $ for Mom: Become a Landlord?" Many thanks to all of you who responded with your practical concerns and helpful advice. Most of you advised against renting my mom's house from long-distance, and that made good sense to me as well. However, after meeting with an elder-law attorney, by brother and I learned that-- if our mom is to eventually qualify for Medi-Cal, and we want to protect the house from state "recovery" to pay her bills-- her house should not be sold until after her death. (Long story on that about "why.")

So, DB and I are left with needing to rent it, to generate monthly income to pay her assisted living bill. Fortunately, his job situation has settled down a bit and he lives only about 1/2 hr. away from her house. (And she is now living in an assisted living facility in the town where he lives.)

That's the basic background. So, here is today's question. If you have been a landlord, could you please let us know whether you have found it best to rent a house furnished or unfurnished?

Since Mom's house is in a suburb of Sacramento, we figure there may be a market of new college grads and/or state political employees who might be interested in the convenience of a furnished house. We would, of course, remove all the personal items and housewares, leaving only furniture. (However, the styles are dated......about 15-20 years out-of-date.) We would only add $100-200/month to the rent, if renting the house furnished.

But, again, does anyone have experience with how this might work out?

Thanks again for sharing what you know.
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Old 02-13-2014, 08:52 AM   #2
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You'll probably get a lot of good responses here but you may also want to try BiggerPockets.com. It is a forum for real estate investing and rentals.
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Old 02-13-2014, 09:29 AM   #3
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Long time landlord here. You do NOT want to rent the place furnished. Particularly with dated furniture. Doing so means your place appeals to the extremely mobile and without possession group. Just out of prison? check. Immigrant working the fields? check.

That dated furniture will quickly become the nastiest stuff you never wanted to touch - next tenant will complain about its function, smell, harbored flea population...

You, and more particularly your brother upon whom the telephone calls for maintenance will fall, want a minimum of objects and systems to maintain.

(ahh the stories of tenants calling to tell me they left me a really nice couch that the next tenant would want [its always a sleeper, huge, and has a leg or two blocked up on books - not nice] or maybe a nice bed that looks like it had a role in a major crime scene)

If you must rent the place then strip it down for action, because rentals see more action in a year than a home does in five.
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Old 02-13-2014, 09:33 AM   #4
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I have only rented my house as unfurnished and as a renter I have always rented unfurnished places. I expect that the pool of renters is larger for unfurnished places since that seems to be the more common way. I have no hard data (and no local Sacramento data) to confirm this suspicion, but that would be my expectation.
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Old 02-13-2014, 09:55 AM   #5
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We did rent our granny flat furnished, but we rented to an extended family member who had no furniture. We put in the lease that we didn't warrant the furniture and would not replace it if it became damaged or broken. For us, it was a win.
(Previously the granny flat had been home to my aging/disabled in-laws so we could help with elder care.)

If we'd rented to a stranger, we'd have sold the furniture at a garage sale and rented it unfurnished.
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Old 02-13-2014, 09:56 AM   #6
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I've rented a couple places furnished. One is a vacation rental. The other was a "Motel Alternative". These require a BUNCH more maintenance since staging is required between tenants. Don't think you guys want MORE work.

Call Salvation Army or another charity group ... they clear the place out for free.
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Old 02-13-2014, 12:51 PM   #7
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Quote:
Originally Posted by LitGal View Post
Hello, All--

Last month I started a thread "Need LTC $ for Mom: Become a Landlord?" Many thanks to all of you who responded with your practical concerns and helpful advice. Most of you advised against renting my mom's house from long-distance, and that made good sense to me as well. However, after meeting with an elder-law attorney, by brother and I learned that-- if our mom is to eventually qualify for Medi-Cal, and we want to protect the house from state "recovery" to pay her bills-- her house should not be sold until after her death. (Long story on that about "why.")

So, DB and I are left with needing to rent it, to generate monthly income to pay her assisted living bill. Fortunately, his job situation has settled down a bit and he lives only about 1/2 hr. away from her house. (And she is now living in an assisted living facility in the town where he lives.)
I assume you mean, Sacramento, California. I live in Bay Area. Many years being a landlord.

1. Do not rent furnished.
2 If your brother is handy, you can save a lot if you do minor repairs
yourself.
3. If you are unsure, how to rent yourself, try and find a mentor.
4. Real Estate agents, will rent for you, but a lot charge a fee, plus a
monthly 10% (of rental).
5. Renting out house yourself is actually easy. But first time, ask for
help. I like, one year lease agreement.
6. Do not rent to students! Lots of wear and tear, and high turnover.
7. Married couple, no children best.
8. Married, with kids, OK, usually stay longer, but expect a lot of wear
and tear
9. Renting to single guys and gals, not good. High turnover. Usually
one party leaves, and ones left can't afford rent.
10. Credit check, is recommended by most landlords.
11. I always get, 1st,last,depost. No exceptions. If tenants cannot afford
do not rent to them.
12. If brother is not handy, and money is no object. Ask, local real estate
agents, and other landlords, if they can recommend a "handyman"
who does minor work. ie. Clean-up, painting, minor repairs.

13. sidenote: Is house in irrevocable trust. That should avoid medicare coming after mom's house. Also, if house is sold after your mom is gone.
House should get a step up in basis. Avoid capital gain tax.
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Old 02-13-2014, 01:42 PM   #8
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My siblings and I each have an interest in a rental home we inherited when our mom died a few years ago. We use a management company, though I managed it on her behalf for several years. It's always been rented unfurnished. Furniture just seems like one more category of stuff to worry about (you probably want to minimize this).

My dad was a much better landlord than I ever was.
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Thank you, Everyone!
Old 02-13-2014, 05:07 PM   #9
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Thank you, Everyone!

DB and I will truly benefit from your hard-earned experience. We are in the middle of starting the clean-out and plan to hire an estate-sale co. to liquidate all the little stuff. But, if we rent the house unfurnished, we will simply add all the furniture to the sale.

Thanks for your help in thinking this through BEFORE the sale.

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Old 02-14-2014, 09:29 AM   #10
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Quote:
Originally Posted by LitGal View Post
Hello, All--

Last month I started a thread "Need LTC $ for Mom: Become a Landlord?" Many thanks to all of you who responded with your practical concerns and helpful advice. Most of you advised against renting my mom's house from long-distance, and that made good sense to me as well. However, after meeting with an elder-law attorney, by brother and I learned that-- if our mom is to eventually qualify for Medi-Cal, and we want to protect the house from state "recovery" to pay her bills-- her house should not be sold until after her death. (Long story on that about "why.")

So, DB and I are left with needing to rent it, to generate monthly income to pay her assisted living bill. Fortunately, his job situation has settled down a bit and he lives only about 1/2 hr. away from her house. (And she is now living in an assisted living facility in the town where he lives.)

That's the basic background. So, here is today's question. If you have been a landlord, could you please let us know whether you have found it best to rent a house furnished or unfurnished?

Since Mom's house is in a suburb of Sacramento, we figure there may be a market of new college grads and/or state political employees who might be interested in the convenience of a furnished house. We would, of course, remove all the personal items and housewares, leaving only furniture. (However, the styles are dated......about 15-20 years out-of-date.) We would only add $100-200/month to the rent, if renting the house furnished.

But, again, does anyone have experience with how this might work out?

Thanks again for sharing what you know.

I live in Florida and have rental property in Virginia since 1989. I have an AWESOME property manager. That is the key to how good or bad your experience will be! Good luck.

Mike
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Old 02-14-2014, 02:12 PM   #11
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Get rid of the furniture. If you rent furnished, plan on junking the items after the first tenant, at our own expense.

Know what a solid tenant looks like on paper. Credit score, criminal record, income and rental history.

Know what rents are. If you are too high, you get trash.

If you get a great tenant, they manage themselves.
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Old 02-14-2014, 02:35 PM   #12
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Quote:
Originally Posted by wolf View Post
I assume you mean, Sacramento, California. I live in Bay Area. Many years being a landlord.

1. Do not rent furnished.
2 If your brother is handy, you can save a lot if you do minor repairs
yourself.
3. If you are unsure, how to rent yourself, try and find a mentor.
4. Real Estate agents, will rent for you, but a lot charge a fee, plus a
monthly 10% (of rental).
5. Renting out house yourself is actually easy. But first time, ask for
help. I like, one year lease agreement.
6. Do not rent to students! Lots of wear and tear, and high turnover.
7. Married couple, no children best.
8. Married, with kids, OK, usually stay longer, but expect a lot of wear
and tear
9. Renting to single guys and gals, not good. High turnover. Usually
one party leaves, and ones left can't afford rent.
10. Credit check, is recommended by most landlords.
11. I always get, 1st,last,depost. No exceptions. If tenants cannot afford
do not rent to them.
12. If brother is not handy, and money is no object. Ask, local real estate
agents, and other landlords, if they can recommend a "handyman"
who does minor work. ie. Clean-up, painting, minor repairs.

13. sidenote: Is house in irrevocable trust. That should avoid medicare coming after mom's house. Also, if house is sold after your mom is gone.
House should get a step up in basis. Avoid capital gain tax.
Notice the common theme here is mitigating your risk of lost rental income. When I was in this "game" the "game" I played was keeping the units rented out each month. It all starts with getting the right tenant and pricing the rental competitively.
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Old 02-15-2014, 12:25 AM   #13
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I've had rental property for many years. One bit of advice, is never rent with appliances if law permits (I'm told that in some states you have to rent with appliances, but not sure about this.) If you rent with appliances, tenants take it for granted that you are required to maintain them. If you do rent with appliances, make it plain in the lease whether or not you will take care of the upkeep.

Also, try to avoid carpet in the home. In my experience, it's totaled after the first tenant leaves, mostly due to pets even though the lease says no pets.

After many years of stress, I was about to throw in the towel until I found out about a program that housed people coming over here from under privileged countries. I've rented to this institute going on five years and the only problem is the language barrier, which can make it kind of hard but I get my rent on time (they pay well), they don't house pets and they keep the premises cleaner than any tenants I've ever had. Also, when a family moves, this international institute places another family. If this is something that appeals to you, you might want to check within your state for such a program.
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Old 02-15-2014, 11:04 AM   #14
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My guess would be that you would be best because of the distance to pay for a rental manager. I have two rentals that are just an hour away and I gladly pay. As for the ones I have here in town, I do them myself but have them so fixed up there is very little to do and I keep the rents low (really now that I think about it they are about 10%low right now).

I would get rid of the furniture, paint and carpet and hope for a long time renter. Also get a handy man in there to fix all doors elec. plumbing ...the works.
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Old 02-18-2014, 07:24 AM   #15
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You are getting some good advice here. I would suggest your brother finds out if there is a landlord association in the town the rental is in and join it and attend a meeting or two. These groups usually are really good resources for networking with other landlords, and often have speakers such as attorneys to discuss issues. Become as familiar as you can in your state’s/town’s landlord/tenant law.
Some examples from where my rentals are (ymmv):
1) I am required to supply a functioning stove, but no other appliances. If I do supply other appliances, I am required to maintain them. I can’t “opt out” by putting in the lease/rental agreement that I won’t maintain them.
2) If you would rather not get rid of functioning appliances in the house, you can sell them at a deep discount to your tenants, be sure to get a bill of sale.
3) Security Deposits are a pain in my state. They require much more work than the last months rent, and it is often still hard to keep a security deposit. I no longer collect these.
4) You can do a lease or ‘tenant at will’. I always do tenant at will since it is more flexible, and I’ve found that if tenants want to leave, they often don’t care about a lease anyway.
5) If your tenants don’t pay immediately by the due date, don’t wait, serve them with a notice to quit immediately. Know the laws in your area for doing this. The sooner you do this, the sooner you can evict them if it becomes necessary
6) Be sure your lease/rental agreement spells out as many things as you can think of such as: no smoking, no pets (or limit on size/type), no unregistered cars on the property, no subleasing, and be sure it specifies all of the people who will be legally occupying the house.
7) Be sure who’s responsibility it is to pay utilities is clearly spelled out. In many states, you will have to pay for water (not mine anymore, as long as it is separately metered per unit). You should definitely include trash in the rent, if the tenant falls on hard times, you don’t want them hoarding trash in the house (yes it happens).
8) Check up on any liability issues you might assume personally by someone getting hurt on your property. This may take the form of umbrella insurance or putting the property in some kind of trust. Talk to an attorney.
OK, that’s off the top of my head…Good luck!
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Old 02-18-2014, 04:49 PM   #16
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1.I've found tenants on my own and used real estate agents. Typically the tenants are better if you use an agent to find them. Check credit, criminal background check, and employment.
2. Get rid of the furniture, but I suggest keeping the appliances and maintaining them. You'll get a better quality tenant if you offer them.
3. Using a property manager for the month-to-month management is up to you. They come in handy if you don't know who to use locally for maintenance and repairs. They will also take care of tenants who don't pay in accordance with the law, which is important to follow or you may have difficulty evicting them.
4. If your local municipality can put a lien on the property if the sewer or any other bills are not paid, pay those yourself and include them in the rent. Everything else should be paid by the tenant.
5. I recommend you add to the lease a no smoking clause and no inoperable vehicles can be stored on the property.
6. If there is a homeowners association, check with them to see what their requirements are before you sign a lease.
7. If you allow pets, collect at least a $1,000 extra security deposit for thorough cleaning after the tenants move out. We always collect one month's rent equivalent for a security deposit. Know the law before you try to withhold any of it when they leave. Most states don't allow withholding it for general cleaning and basic wear, but for outright damage it is usually lawful to hold it as long as you properly document the repair and provide written notification within the legal time frame after a tenant moves out.
8. Ignore any hardship stories trying to talk you into returning a security deposit early before you've done a thorough check of the house after a tenant leaves.
9. Always begin the notice of late payment of rent notification process if the rent is not paid withing the time noted on the lease. That is usually the first step in eviction. If you don't follow the lease and the steps required by your state law, the judge may say you didn't follow the lease or legal requirements properly, drawing out the process of eviction. They will usually pay if they know you're serious. Be sure to collect any late fees in the lease.
10. Build up a fund to cover repairs, taxes, maintenance, etc.
11. Depreciation of rental properties can be your friend, but in your case may not be worth the accounting/tax hassles since you won't own the property. Check with a professional tax adviser on this.
Hope this helps!
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