Social Question

Dutchess_III's avatar

Do you think renting our house is a good idea?

Asked by Dutchess_III (44147points) July 23rd, 2011

We have had our house on the market for almost a year, asking $95,000. I’ve been totally against renting just because we all know the horror stories.

But lately I’ve been reconsidering. For one thing, the rent would be $900 a month. Anyone who could afford that would be, one would hope, a little higher class than some kid wanting to rent a place, any place, for $200 or $300.
I would run credit checks and ask for references.

Also, I’ve been hearing that because of the economy more people are renting rather than buying. My realtor thinks he could have someone in in two weeks.

Also, he suggested that in exchange for being the manager of the “rental,” he get 10% of the rent every month. What would be the advantages of having a third party in this situation?

Anyone out there a landlord? What do you guys think?

We owe $69,000.

Observing members: 0 Composing members: 0

44 Answers

Tropical_Willie's avatar

Not a landlord now, agent fee of 8.25 % is reasonable ( one months rent per year ). The agent is responsible to collect the rent and pay you monthly. Remove ALL personal items and furniture. Check with your insurance and mortgage companies, there maybe a clause that restricts the rental of the property.

JLeslie's avatar

I have never had a problem with a rental either as a landlord or as a realtor. But, problems can happen. I would say the problem tenant is fairly rare, but when you get one the problem is pretty big and annoying. Some states have very easy laws to evict someone, while others don’t, something to consider.

Usually the people saying don’t be a landlord have never been one. Another thing to consider.

10% was the most common amount when I was a realtor in FL. Some realtors charged one month’s rent, some service charged as much as 20% to rent and manage a property, especially if it was rented monthly and furnished.

I had times where I did all the work, collecting the checks etc, and other times where the renter paid monthly directly to the owner. I always was paid my full commission when the contract was signed, I was not paid on an ongoing basis monthly as the rent came in.

Hypocrisy_Central's avatar

RENT!?!? Are you mad!?!? I would NEVER rent anything. I would lease it to them, but never rent. I had very good acquaintances who was into that sort of thing, buying properties and flipping them or leasing them out. I ask way leas over rent and they told me in the eyes of the law, when you lease it to them the lease is a legal document, a contract between you and the person leasing the property. If you leased a car or a boat and didn’t pay, you do not get to keep using it while the business tried to get it back. There conditions are in the contract of how the lease is constructed, this is what you do, this is what they do, if any of the conditions deviate off the lease without both parties agreeing, the lease is broke. Depending on who broke the lease there are remedies spelled out in the lease agreement. If the lease say they are to pay on a certain day and if not they have X amount day grace to pay up with a late fee and if not the lease is considered broken. If broken they have to vacate the property in 72 hours, if they signed the lease agreement means they read and understood the conditions. I don’t know what state you are in but I would check the laws 1st. Depending on what it says it makes sense to me to RTO it or straight out lease it with the hope of selling after the market came back. The up side is, you still have it as an asset to use for collateral on another property if you had to.

LuckyGuy's avatar

When we went overseas we rented, sorry, leased our house . It worked out great. We hired a property manager – a realtor who took one month rent for finding the tenant, running the credit check, collecting rent. Sure there was wear and tear after five years but we painted when we returned home. No problem.

jaytkay's avatar

@Hypocrisy_Central

Rent and lease are used interchangeably in the US for homes and apartments.I have been a renter and a property manager in four different states in four decades and have never been involved in an apartment rental without a signed lease.

crisw's avatar

You might want to consider selling the property on a lease option. That way, you get someone in there paying you rent, and, because they want to buy the house eventually, they are more apt to take care of it. If you consider this, make sure to find a realtor who specializes in them and get all contracts checked by a lawyer.

Neizvestnaya's avatar

Yes, rent it and stick to your price. Credit checks will help you filter out the people who are in a bind because they’ve lost their homes and or jobs from the people who’ve been habitual bad credit people all their lives.

Dutchess_III's avatar

What are the advantages of having our realtor as our manager? What do I get for 10%? If all he’s going to do is collect rent, well, hell. I can do that!

JLeslie's avatar

@Dutchess_III The biggest reason to have a realtor is to get it into the MLS. They can also help, and provide you, with the contracts, but you can probably figure that out yourself too, especially if you want a lawyer to look at the contract anyway. Usually in FL we do not have lawyers involved. If the renter has a realtor, then even if you do not have a realtor they will ask for 5%, which I recommend doing.

incendiary_dan's avatar

Are you in the northeast? In a few months I planned to start looking for a house to rent.

Dutchess_III's avatar

I didn’t understand this part @JLeslie “If the renter has a realtor, then even if you do not have a realtor they will ask for 5%, which I recommend doing.” Who asks for 5%?
For renting purposes, I don’t need the MLS. That’s only necessary if we’re selling.

Naw. In the midwest @incendiary_dan. Kansas. Home of the hot and dry.

Aethelwine's avatar

Not all renters are scumbags who won’t pay on time or take care of your place. So many people are losing their homes to foreclosure (my family included) and are just looking for a place to live that is more affordable and get back on track. For what you are asking I think renting is a good idea. It will help you pay off what you owe.

Dutchess_III's avatar

@jonsblond Thanks….I’m starting to feel much better about the idea.
I’m sorry about your home. We were teetering on the edge for a loooong time. Just got current about two weeks ago, for the first time in years.

Well, I’m not saying you can’t rent it @incendiary_dan! Not saying that at all! : )

JLeslie's avatar

@Dutchess_III The 10% is typically split 5% to the listing agent, and 5% to the agent who brings the tenant. If the listing agent actually brings the renter for you then she gets the entire 10%, but that rarely happens. If you advertise your house for rent and a realtor thinks it will be perfect for some clients she has who are looking for a place to rent she will call you and ask if you are “cooperating with realtors.” she is looking for the 5% she would make if she showed her clients a house on the MLS. If you say no, she won’t show them your house.

Does that make sense? It’s the same when you sell a house the 6%, or whatever percent you negotiate is split between the listing agent and the buyer’s agent.

Neizvestnaya's avatar

Listing on MLS means you’ll get a lot more lookers because people from across the states access the MLS through property management websites.

When going out to find a house to rent last year, we first looked through all the Craigslist and hit & miss google searches before asking an agent to help us. The houses we found through the MLS were far better than what people were listing independently. I think you’ll the type of tenants you want that way, people who aren’t afraid of credit checks and who are willing to pay deposits and monthly rent through a service because they are responsible.

.

snowberry's avatar

I don’t understand everything involved in captial gains tax, but when you rent out your place, you need to know what these laws mean, and how it can affect you, now and in the future. Also, it’s a pain in the butt if you rent out your place and you’re far away. If you’re far away, you must be confident in not only your renters, but the people managing the place for you. In our case, our renters are so good at taking care of the place we are confident in them to let us know what needs fixed, to find a good repair man, etc. If you can find a renter like ours, hang on to them. They’re worth it.

Aethelwine's avatar

@Dutchess_III It was hard to let go, but the best thing for us. We aren’t sorry now and are very happy to rent and be good tenants. We have a wonderful landlord who will let us fix up the house and he’ll foot the bill. We got lucky. There are good people out there that are just having a hard time and want to make things right. Good luck to you.Hope you find the right people if you decide to go this route. =)

JLeslie's avatar

About the taxes, which @snowberry brought up, once you rent out your place more than 2 out of 5 years owning it, when you sell you will have to pay taxes on the profit if there is one. In the housing market today, that isn’ a big deal, because I doubt you have a profit to worry about. On a primary residence you can gain up to $500k on the sale of your house (if single $250) and not pay any tax on the profit. I am guessing you are switching your primary residence to wherever you are living now anyway.

A same, but separate issue, is once you start renting your property can become an investment, you can depreciate the property on your taxes, and when you sell if there is profit you are taxed on capital gains which is a good thing, because as we know from politics, capital gains is taxed lower than regular earned income.

I would definitely use an accountant on your taxes so he can take all the deductions available to you while renting out the house.

Dutchess_III's avatar

Thanks guys….well, we just started working on this decision yesterday. It’s looking better and better.
What about this scenario….we left the house about one O’clock yesterday and stopped at a convenience store. I’d heard the new owner was looking to buy, so I talked to him while I in there paying for the gas. He said he wasn’t looking to buy but he wanted to rent….it was like some sort of sign! He didn’t bat an eye at the price and he said he’d come by sometime.
If we rent to him, does that mean I only owe my realtor 5% since I’m the one who found the renter?

JLeslie's avatar

If you already listed with the realtor, most likely she had you sign annexclusive rental agreement, which means you pay 10%, you have to read the contract. If you don’t have a rental listing agreement you don’t owe any realtors anything.

Dutchess_III's avatar

Here’s what I want to do…I want him to find a renter, and I’d like to give him a finder’s fee, but we certainly don’t need a manager. What would be a fair finder’s fee?

I gotta find the contract @JLeslie…thanks for pointing that out to me.

JLeslie's avatar

@Dutchess_III You certainly can negotiate any deal you want with the realtor before signing the listing agreement.

I would most likely charge you 10% no matter what, with the exception of negotiating 7% if I get both sides of the deal. It is very little money and takes almost as much work as selling your house. I need to enter everything into the MLS, take calls, deal with the contracts, answer questions, and find you another tenant for free if the guy doesn’t pan out (although that is rare).

You are going to rent for $900 a month. That is $1080 you pay in commissions. I get half if there is another realtor bring the tenant. $540 then split with my broker who gets probably 25%-50% depending on the real estate company. So I go home with $270 – $405 in my pocket.

The only thing I might do for less is listing in the MLS and the possible tenant does everything directly with you. That would be an upfront nonrefundable flat fee of $250, and you would still need to pay the other realtor 5% if another realtor brings the tenant.

But, it sounds like you already are listed with an agent.

Dutchess_III's avatar

But I don’t see why I should pay him $90 a month for the rest of my life just because he found a renter. I mean, we can go through a lawyer, for a flat fee for the contracts.

JLeslie's avatar

@Dutchess_III I have never collected anything past the 10% at the time of the rental contract. On the listing agreement it usually states if the realtor gets paid again if the contract is renewed for another year. I have never expected to collect a fee after the first contract. My partner said she has written contract where the landlord was supposed to pay, but she has never collected it.

Dutchess_III's avatar

Are you saying that it would be a one time fee of $90? Only paid again if the renter resigned another year lease?

JLeslie's avatar

@Dutchess_III No. The way we did it was we received the commission for the entire contract at the time the tenant signed the contract. So, if it is a year contract 90×12=1080 so I would get the $1080 all at once, and usually only heard back from the landlord again if the tenant flaked out and stopped paying (which never happened to me personally actually) or when the tenant moved out after the lease was up, and I needed to rent it out for them again. But, it probably varies by state. I’m going to send a PM to Judi and ask her how it works where she lives.

Judi's avatar

I Know I’m coming in late. I am in California and have been in the property management business for over 20 years. A couple of things I would add. The realtor earns that 10% because he insulates you from the renter. When the faucet leaks, or the water heater dies, they call the Realtor, not you. You are still responsible for paying the bill, but you don’t get the 2 AM phone call, and you don’t have to scurry and find a plumber. The realtor has a list of vendors who often give you a lower price because of the bulk business the realtor gives them. The realtor is also more aware of the laws than you. Just rent the movie Pacific Heights and see what can happen if you don’t know the laws or don’t screen in accordance with fair housing laws.
The down side of renting is that you have to depersonalize the property. Forget that you had your first family Christmas there, forget that you measured your kids heights on a certain wall, forget that all your good and bad memories are wrapped up in that house. This is business. No one will ever treat this house the way you would. Damage will happen and it is a cost of doing business.No matter how high class the tenant is, it is not theirs and they will never treat the property the same as you will. Having a realtor will help, because you won’t have to go over there every time they have a maintenance request, but if you are emotionally invested in the house, you are going to be disappointed when things happen.
In this market, good business would say rent until the prices come back, and if you have a positive cash flow, then keep it so you will have retirement income. Only you can decide if you are emotionally able to transition the property in your own mind, from home to investment.

JLeslie's avatar

With my rentals many times the owners had a service contract they paid for regarding appliances and plumbing. If something broke down the tenant just called the 800 number for the service. I didn’t on one of my rentals that I owned, because the unit was brand new, but otherwise I would likely have a contract, especially if I lived outside of the immediate area.

@Judi Do you get the entire 10% when the rental agreement is signed by everyone and the tenant moves in? Or do you get 10% per month, every month for the length of the lease?

Judi's avatar

I only do apartments over 40 units so the percentage is less. The market around here is anywhere from 10–20% of all collected income (for single family homes.) Sometimes they want the percentage for security deposits and sometimes they don’t. Sometimes there is additional charges (outside of the ordinary turnover expenses) each time they have to market the house. Vacation rentals are more.

JLeslie's avatar

@judi I’m not referring to the percentage, but rather when you get your money. The OP makes it sound like every month the 10% will be paid to the realtor, we got paid the whole amount the first month for the year.

Judi's avatar

Most people I know that do single family just take it monthly. I’m sure that’s negotiable. I think they also charge an advertising and lease up fee at the onset in addition to the 10%.

Dutchess_III's avatar

@Judi We’re going to but the measuring wall out as soon as…we do! We’re taking it with us!

Thanks guys.

Dutchess_III's avatar

The thing is, guys, between my husband, my son and me we can fix just about anything. My husband was an ASE certified mechanic for many years, was a licensed plumber for many years, was a licensed electrician for a long time (however, we would hire a currently licensed electrician for any electrical repair, but my husband would know what was wrong before we did) my son is experienced in construction (including roofing) and remodeling and I…..well, I am not afraid to go after money that is owed me. I owned a business for 4 years.

If someone called our realtor “go-between”, the next call would go to us and then we’d fix what ever, probably ourselves. The only example for his services that he pitched us was if, for example, they fall behind on the rent—if we go after them we’re the “bad guys.” If he does it, it’s business. That was the only example he gave us. .... Seriously! I don’t give a RA if someone sees me as the “bad guy!” I need mah money, and I’m not playing!

I would think there must be some attorneies out there who could give us legal advice on renting for a one time fee, which would be better than paying a go-between $90 a month for the next hundred years for nothing.

JLeslie's avatar

@Dutchess_III You can negotiate any deal if the realtor will go for it, if you decide to use a realtor. Like I said maybe he will do a flat fee for listing it? Or negotiate 3% on his side, so a total of 8%. Since their only responsibility is listing it. You can also ask a real estate lawyer to look over the contracts or provide you with one. All are ok suggestions. Or, you can do the whole thing on your own, try to rent it by word of mouth. I twice rented out a place I owned before I ever put it in the MLS, one I met the tenant in the elevator of my building and the other a coworker needed a place for his parents.

Judi's avatar

@Dutchess_III ; If you want to do it yourself, I would suggest you join your local rental housing association. You can find someone local affiliated with the National Apartment Association here. Most of the members are small owners like you. The dues are usually pretty affordable, especially compared to management fees paid to a realtor. The benefit is, they will make sure you have forms that are in compliance with local laws and they have other educational resourses that will help you navigate the trecherous worlds of Landlord Tenant Law and Fair Housing.
Who know, you two might find that with your combined talents you are so good at this you will start investing in more rental properties!

Dutchess_III's avatar

@JLeslie I do know that the realtors around here keep a listing of rentals. I don’t know if there is a charge for that. Did you have any problems with the two you rented to on your own? Were they of any lesser quality than the ones off of the MLS? Also, both of you…what is the longest you ever went with out having your property rented out…idling?

You guys have been amazing! Thank you! I’m saving that link now @Judi.

Judi's avatar

I have apartments so I always have residents, but there were a few times when occupancy sunk in to the high 80% and that was scary.

Dutchess_III's avatar

How long were they empty @Judi?

Judi's avatar

Some for a few months.

JLeslie's avatar

I never had any problems with any tenants ever. Not as a realtor and not with my own properties, no matter how I found them. The least expensive property I rented out was $1500 a month, so that might affect it a little. I have not done nearly as many rental transactions as Judi.. My real estate partner has had two problems that I know of, nothing major, she has been doing real estate for a long time though. And, a colleague of mine when I worked at Bloomingdale’s had one horror tenant, really bad, ruined the carpets, really left a mess. My uncle has two rental properties the last 30 years and has never had a problem. I have another friend who has had one for probably 20 years and also it has been a good experience. My FIL had one tenant who was late a few month in a row with rent, but he did get his money, they had hit hard times and needed a little slack given to them. But, all of his other tenants have been no trouble.

Like I said above, usually the people most negative about being a landlord have never been one. My properties rented pretty quickly usually about a month, and then it was another month until they moved in. Sometimes the seasonal rentals were on the market a little longer, depending when they were listed. But, every market is different.

Dutchess_III's avatar

Thanks guys.

JLeslie's avatar

Good luck! :)

Dutchess_III's avatar

Uhhh. Did I mention we’re laboring under a government mortgage loan I took out in 1999? Uhhh….what a cluster.

Answer this question

Login

or

Join

to answer.
Your answer will be saved while you login or join.

Have a question? Ask Fluther!

What do you know more about?
or
Knowledge Networking @ Fluther