As any military family can attest, a Permanent Change of Station (PCS) move comes with some tough decisions. If you happen to be a military family that has a mortgage with your name on it, this type of transition can come with a lot of anxiety. To sell or not to sell, that is the question! Holding onto your property may seem like a great choice until you realize this requires you to become a landlord.
There are many things to consider when you embark on this adventure, and it’s worth doing your research and due diligence in order to avoid many of the common pitfalls that can plague landlords.
Taking the time to research your tenants and secure a legally binding lease agreement is paramount to your success. There will always be an element of chance when you choose to rent out your home, but hopefully the following information will help guide you along the way.
Understand Your Legal Obligations
While there are many aspects of renting out your home that will happen simultaneously, there needs to be a starting point. Consulting the Federal Fair Housing Act and the State Fair Housing Laws for the stringent guidelines regarding rental practices is something that every landlord should take the time to review. You certainly want to keep the law in mind as you make your way through the process.
See Understand the Fair Housing Law When Listing Your Property for more detailed information.
You’ll also need to convert your homeowner’s insurance to fire and hazard insurance, commonly known as rental property insurance. If you’ll require your tenant to carry property insurance, stipulate your insurance requirement in the lease.
Setting Your Rent
Setting the proper rental amount is an important facet that requires thought and research. Several aspects come into play when making this decision, including the amount of mortgage payment you need to cover, the existence of homeowner association fees, and the requirement for contracted maintenance.
Research and common sense should prevail in this department. Take the time to look at homes for rent in your area and compare them to what you’re offering. This will give you a reasonable idea of the rent your home can command.
Finding prospective tenants is where the magic happens! Marketing your home effectively may afford you the opportunity to screen multiple prospective tenants. With the widespread use of social media, it’s easier than ever to market your home in a variety of creative ways. Of course, your first choice for advertising should be with MilitaryByOwner.
However, we always advise our customers to market their home in a variety of ways. Consider other advertising websites, social network sites, and an ad at your local housing office. Spread the word within your current unit and to your family and friends. Include details about what you are including in rent (utilities, yard care, pool), local school information, and community highlights. Be sure to include photos of your home, as ads with photos on MilitaryByOwner are viewed 60% more often than those ads that don’t include photos.
Preparing for Tenants
If you’re looking to make the rental process easier, then it’s a good idea to use a critical eye and see what you can do to put your best foot forward. Cleaning and organizing are not only important when selling your home, but are also a method to attract the perfect tenant.
Consider putting together a rental home binder for tenants, to include appliance instructions and warranties, home warranty policy, contact information, any quirks of the house, location of water main shut-off, and neighborhood and HOA info. While being careful not to overwhelm, providing information about the home can limit calls and emails regarding basic questions. A Guide for the Unexpected Military Landlord breaks down the process of preparing for tenants.
Begin the screening process by having prospective tenants fill out a rental application that authorizes you to perform a credit and background check, and ask for a photocopy of their identification as well. Get a full credit report and a comprehensive background check from SmartMove.
Do not skip this critical step! If you don’t want to incur the expense, you can require an application fee. Utilize references from previous landlords as well as character references, which can give you insight into your prospective tenant.
If opportunity allows, meet your prospective tenants in person, as face-to-face meetings allow you to get a feel for compatibility. As a second choice, an in-depth phone conversation can help provide a bit of insight into this new relationship. Trusting your instinct is always a good rule of thumb.
Your Lease Agreement
It’s important to think ahead a bit when determining the terms of your desired lease agreement. What length of lease agreement are you willing to offer? Is there the opportunity for your tenants to renew after the initial lease expires? Will the rent include utilities, yard or pool care? What is your pet policy? What are your required security deposits and smoking policy? What date will your home be available?
Once the hard work has paid off, and you have a tenant ready to sign a lease agreement, make sure that you have a state-specific, legally binding agreement. As a military homeowner, including a military clause that will allow you or your tenant to terminate the lease agreement in the event they receive orders is another important detail to factor into your paperwork.
Tenants and landlords alike can benefit from a written code of conduct clearly stating what you expect from your tenants and your expectations for access to the property for the occasional walk-through. This avoids any confusion or discrepancies during the term of the lease.
Plan for Expenses
One of the common fears of becoming a landlord is the unexpected maintenance costs that arise when you least expect them. A technique for managing this financial upheaval is to create a maintenance fund that holds an amount of your choosing.
The wonderful thing about military life is there is always someone who has gone before you. This is a perfect opportunity to utilize your military network and ask your friends and colleagues what advice they would offer to avoid the most common pitfalls of becoming a landlord.
Be sure to utilize all the free landlord/tenant resources available on MilitaryByOwner, and don’t miss the updated information regularly featured on our blog.
By Jen McDonald with Monica Schaefer