Renting Your House Because It Did Not Sell. 10 Tips to Consider before renting.

Renting Your House Because It Did Not Sell.

 10 Tips to Consider before renting.

  

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Renting Your House Because It Did Not Sell.

10 Tips to Consider before renting.

There are many homeowners that think about renting their house because they could not sell it or want to wait for the market to improve. If you become a landlord because your  house did not sell for what is worth in today's market and instead of selling now, here are 10 tips to consider before embarking on that slippery road. This is especially useful when you still have a mortgage on the house.

1. Make sure you have at least 6 months reserve for the mortgage payments, taxes, insurance,HOA and condo fees (if applicable). This is vital for when your tenant is unable to make rent payment(s) but payments need to be made. The reality is, many landlords do encounter late or no payment renters, so preparation is key.

2. Have a reserve for damages and repairs.Your house is now a rental property and the tenants are not obligated to take care of the property as a homeowner would. Tenants will call for minor and major repairs, so it is very important to have enough money for necessary repairs when the need arise.

3. Be prepared to register the property with local authorities as a rental unit. This is required in most jurisdictions in the State of Maryland. The annual fee ranges from $30 in Baltimore city to $100 in the city of Bowie.

4. If the house was built before 1978, it must be register with the State of Maryland Department of the Environment for the lead paint reduction program (more info here MDE). This is imperative because the liability of lead poisoning is huge.

5. Contact your insurance company to inform them that your house is now a rental property. This is crucial because if there are any damages requiring an insurance claim, and the insurance company determines the property in not owner occupied, they may deny your claim. This is a very common situation that could be avoided ahead of time by informing your insurance company of a policy change.

6. Ensure the you receive a copy of the water bill. Water bill lien, unlike other utilities attach to a house. If tenants are not making the water  bill payments, you want to know quickly and make sure the payments are made. Unpaid water bill liens can make property go into foreclosure in some jurisdictions.

7. Do not make tenant responsible for the HOA or Condo Association Fee. It will not be paid and once that happens, it becomes a lien on the property. Home owners association & Condo Association Fees can also lead to foreclosure so it is important that the responsibility to make these payment remain with home owner.

8. Have a reserve fund for if and when you have to take the tenant to court for non payment of rent. This will surely happen and in the State of Maryland, it can take up to one year to get a tenant evicted if the tenants know how to work the system and getting a tenant evicted does not guarantee that landlord will get outstanding rents. The last time I was at the rent court for a personal property I could not believe some of the defenses given  for not paying rent. Here are just some examples of defenses:

-          The house was not a good living condition (but tenant refuse to move out)

-          Tenant understood that they owed the rent but didn’t have the money

-          Tenant needs more time to look for another property so they can move out (No plan to pay the current landlord)

-          Tenant had lived in the house for 20 years, owed $10,000 in rent and late fees but they argued the amount may be lower because they claimed to have overpaid in previous years.

10. Take interior pictures of the house before handing over to tenants. This is an important task so that when the tenants move out it can be referred to when dealing with return of security deposit.

11. Hire a property management company. Hiring a reputable management company will save lot of headaches concerning repair calls. They screen tenants before renting, ensure rent is paid and best of all, they can go to tenant/landlord court when the need arises. Hiring a property management company really makes sense especially for someone that does not have any experience as a landlord.

Being a landlord is not for the faint of heart, it requires planning and is not a decision to be made simply because you cannot sell a house for what you want. Many times, the income from the rental will not cover the mortgage payment when all other factors are considered. Making a decision to be a landlord must be deliberate and well thought out because it can drive some landlords into foreclosure.

Many times is better to sell a house at the current market value instead of waiting for the market to improve, because the stress and money involve in renting a house for someone that is not an investor may not be worth it.

The bottom line is plan for the worst and hope for the best when    becoming an unplanned landlord.

   

When you decide  which you’d like to do, Call Keji & Associates of Fairfax Realty to discuss your plans. We'd love to get your home rented or sold. Call 301-613-2043 to speak with us