Tuesday, September 13, 2011

Questions on Turning a Rental

I had a couple of questions on how we handle turning a rental property, how we manage security deposit charges, etc.
Frugal Coconut said...

Does Mr. Sam do the painting and cleanup himself or do you outsource those jobs?

I just had to do those as well as I'm also in the process of re-renting ... and it just seems as though it would eat into any potential profits, especially if the tenant hasn't been there that long.

I don't know what the fine line is for paint being a wear-and-tear item for which you can/cannot charge the tenant. My previous tenant put holes in the walls despite the rental agreement prohibiting it. Luckily I had to repaint anyway because it was time ... but what if it wasn't? And what is a typical lifeline of paint so that I would know whether the tenant got it dirty/blemished prematurely or if I just have to suck it up and fork over the cash to have it repainted at turnover?

How do you handle things like that? What is worth the hassle of deducting from the security deposit, and the risk that it will be disputed in court?

Anonymous said...

I have a property management firm take care of mine, I have no direct contact with the tenants. They seem to get higher rent than I think I could (so that offsets some of the cost). We agree on the rent and they have discretion for up to $100 for repairs then need my approval. Over 9 years they have done a great job screening tenants and my current tenant has been there 5 years. They also seem to get volume discounts for us (like painting) since they manage a few hundred homes. 10% of the top of the rent for all the above.

First, when it comes to turning our rental properties, Mr. Sam does almost all the work himself (although he often has a guy who works with him or who works at the property when Mr. Sam is at work).  At this point in the game, Mr. Sam has all the supplies, equipment, know-how, etc. to do just about all the rental maintenance that is necessary.  We also, minimize costs by using the same paint colors for the exterior of our rental homes (and our primary home), same paint color for the interior of our rental homes, and we utilize the same carpeting from rental home to rental home.  

Second, when it comes to paint, we don't count that as a charge against the security deposit, because we almost always paint each time a rental turns (most of our rentals are more than a year), we count it more as cleaning.  Security deposit goes to actual damage.  We also try to take a non-refundable pet deposit as part of our security deposit.   And since its non refundable there is no discussion as to what we are charging for. 

Third, we've never used a property management service so I can't really speak to same.  For us the costs, which seem much higher than what Anonymous reports, are just not worth it.  All of our properties are within 10 miles of our home, we have lawn service for one, but otherwise we (meaning Mr. Sam) can manage them with one Saturday of work per month when they are rented.


Frugal Coconut said...

More questions! How do you advertise your properties for rent? Do you use Craigslist or Postlets or do you hire a real estate agent to put it on the MLS or do you use a dedicated rental agency...? Do you wait to list it until after the existing tenant moves out, otherwise how do you negotiate with the tenant who still lives there so that you can show the property to prospective new tenants? Let's say that you had a new tenant who wanted/needed to move in right away ... how much time do you allow between the previous tenant's move-out and the new tenant's move-in for cleaning, etc.? Do you ever sign a lease with the new tenant (specifying a move-in date) before the old tenant has moved out, just in case the old tenant doesn't leave on time for whatever reason or in the unlikely event that they trash the place before vacating it? Do you use a customized rental agreement or a standardized form, and from where did you procure it? Do you keep making revisions over time based on your experiences (things you might want to spell out for next time) or legislative changes?

Sam said...

FG, all good questions.

I swear this is the last time we list our rental in our local newspaper classified, since we just don't get the traffic from the paper.

The majority of our traffic comes from Craig's List and for two of our rentals, two very good signs that we post on the lawn generate quite a bit of traffic. Our signs include a flyer that has the layout, the rental rules, the rental price, etc. Mr. Sam doesn't understand the little rental signs that just give the phone number to call. He would prefer to give as much information upfront as possible so people don't call him asking questions like how much is the rent. We also have a web site that we keep and we have a page for each property so we can just post the page for that property when we are trying to rent it.

Generally we lose a month between rentals, by the time the property clean and ready to show its normally the middle of the month or second weekend. We don't post the listing until the property is 99% ready to be shown. We will rent to someone mid month though and we often do so, so normally we don't lost the whole month of rent.

We have a standard florida rental lease but, over time, I have tweaked it since you learn from past issues.