Financing – Alternative Options: Rent Out Existing Home

financing-alternative-options-rent-out-existing-home

I know…you have heard all of the horror stories of renters, when people try to rent out existing home . Horror stories are incurred by those who have no clue on what they are doing. I have been renting out my home that I lived in for 16 years prior to buying our off-grid property. I have now been renting out that home for the past 8 plus years and have been very successful at it. Why? I did my homework and joined some real estate investment, free clubs, for a couple of years prior to renting it out. There are actually secrets to successful renting. The most important thing to know is that it is better to rent out to the right person than to fill a vacancy.

In order to attract the right person, you have to have the right home for that person. If it is not the right home, right now, invest the money to make it the right home. Fix it up! Attract your preferred renter.

But who do you want to rent it? I realize that this is a generality, but it has always worked for me. Non-smoking single women are softer and cleaner on homes that men, children and pets. So I advertise, free on Craigslist and local online newspapers, for Female Housemates. I don’t advertise for families. Having singles instead of families is best since it makes vacancies not such a big deal. It is easier to make up the difference of a one room vacancy payment than to have all of your home vacant at the same time. Make sure that your lease agreement is contracted for at least 6 months so that you don’t have tenants moving in and out all of the time.

It is, also, good to have the utilities split between the number of tenants that are in the home versus split by the number of rooms in the home. That way you don’t get stuck with utility bills. It is amazing how frugal your tenants are with gas and electricity when they have to pay for it. It is, also, amazing how fast they want a new tenant in when they have to split the utilities with 2 other tenants instead of 3 in a 4 bedroom home. It is all based on psychology.

How many bedrooms are in your current home? Let’s say you have 4 bedrooms. Then you fill each of those rooms with a female housemate, professional woman. Make your ad lengthy. Only attract those professional women who want a clean home, with shoes off policy and who are immaculate, who want quiet time after 9 pm and who will not bring any pets into the home. Make sure to list all of the amazing things about the home and the neighborhood.

When you interview the potential tenants, find out their life-style. If they are partiers, you don’t want them. You want women who go to work each day and come home and unwind (usually women over 30 years of age seem to have this type of temprament).

To determine how clean they are, go out to their car with them after they have seen the home. See how clean they keep their car. If their car is a mess, or even filthy, that is how they will keep your home so don’t rent to them. You can even keep a part of the rental application back until after they have gone back home. Go to their home and just show up unannounced and ask to be invited in. See how they are caring for the place they are currently living in.

Do your homework –

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  • CHECK ON THEIR REFERENCES. Call their place of employment: Are they currently really working there; How long have they been working there; Are they making the earnings that they said they they made on the application; Does their employer plan on keeping them as an employee for a long time; Will their housing costs and debts be under 40% of their total income? Knowing these things will make it so that you are sure that your potential tenant will have the capabillity to always pay their rent on time to you each month.
  • CALL THEIR PREVIOUS LANDLORD: Do not skip out on this. Yes, their previous landlord may just want to get rid of them and may say anything to make this your problem instead of theirs, but most of them, I have found, actually are quite honest. Ask them: How did you like this tenant? Were they clean? Did they take care of your rental? Did they pay their rent on time? Did they give you advance notice of moving out? Would you rent to them in the future?

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Now, I know this seems like a lot of work. But once you get your first GREAT renter, you can make it their job to interview your future renters. You don’t even have to pay them to do this. You make it so that it seems like it is a privilege for them to do it by telling them the following: “You know, Elizabeth, I work differently than most landlords. I like to let my tenants choose who they get to live with since I want you to feel safe and happy with future tenants that move into the home with you. So when I have someone who wants to see the home. I will text their phone # to you. I need you to get with them to set up an appointment to show them the home and interview them within 24 hours. Then I need you to get back with me to tell me whether they are a fit for you or not. As long as you are willing to do this in a timely manner, I will always let you have this privilege; otherwise, I will choose who moves in.”

I have never had a tenant NOT want to be the one to choose. This saves you time and I have NEVER been disappointed with their choices. Your tenants want even better tenants than you do since they have to live with them. All you have to do is send the potential tenant a rental application after they have been pre-approved by the current tenant, which is where you will verify their employment and landlord reviews. After you feel they are a good fit for you, you will just send out a thorough rental lease agreement. You can find great free ones online that have all of the legal jargon and you can add your own specifications to them.

I collect the prorated 1st month’s rent, a security deposit equal to the rent and a $250 cleaning deposit. It is important to have a cleaning assignment that is divided amongst the number of rooms in the home. These cleaning assignments will clean the entire house thoroughly, once all tenants move out the the home.

So include EVERYTHING, the WHOLE interior of the house to be cleaned. Each tenant cleans their room/bathroom as well as their part of the home. I only include inside items of the home and their part of the yard and garage (charge extra garage rent to those who get to use the garage, $30/month each. Other tenants will have to park on the street and can not park on the driveway blocking the paid garage tenants). Let your tenants do the yardwork. You can provide the equipment.

Be picky on the cleaning. You can include window seals, window tracks, walls, ceiling fans, baseboards, etc, etc, etc. Even put vacuuming/shampooing of carpets as one of the items to be cleaned. You will want to put each item separately on a “Move Out Cleaning List” where you can check off each item. Put a partial dollar amount of the $250 cleaning assignment for each item. Make the amount reasonable. If they had to pay $80 to have their share of the carpets cleaned, then you may want to give them $90 credit with the receipt from the carpet cleaner. If they cleaned the baseboards, you may want to just give them $5 for that job.

I like to give a list of suggested cleaning supplies that I know work for cleaning each item. If they cleaned the item thoroughly, check off that item and they will get that amount of their cleaning deposit back. If they did not clean it thoroughly, they don’t get ANY credit for that item.

The items they don’t clean thoroughly, I go in and clean. I want the place to be immaculate for the next tenant who is approved. I don’t mind doing the cleaning since even if they walk away not cleaning it, at all, I can make $250 doing it myself. That is great money!

I always give the cleaning assignment for that room to the potential tenant along with their lease agreement so they know what is expected of them when they leave. My tenants like having it, at the beginning, so they can keep those areas clean while they are living there. This makes moving out a lot easier since the cleaning won’t be so overwhelming.

Where will you live if your paradise has no home? Invest in a travel trailer and live there while you build. There will be more articles on rural home ideas, alternative power/water options and the like in other posts.

[box type=”info” align=”alignleft” ]HINT: How to get your rent payments on time each month – Make it a privilege for your tenants to pay you on time. Tell them, “For those of you who do not wish to mail your payments, I will be by on Monday, the 30th, to pick up all rent checks. Please place them in the designated area (kitchen counter) for pickup”. It is amazing how many of your tenants will want to save the price and hassle of mailing. You will get your checks on time every month. Don’t waste that trip. Use that monthly trip to do any maintenance or errands that you need to run in that area. I have NEVER had to worry about late payments.[/box]

About Julie

A loan officer of 15 years, a gardener of 40 years, raised on a 1200 acre ranch raising 300 head of sheep. Creative and intuitive, she envisions beauty and makes it a reality whether with sewing, cooking, knitting on her knitting machine, in her home or in the garden. She is blessed to live with her best friend as her husband and she has always felt as one with God, nature and with animals and would turn to the mountains for strength and now lives her life, totally content in the Rockies at 8700 elevation.
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