“My house has been on the market for over a year now, and it seems that it’s never going to sell!” This is a statement that’s often heard from home sellers in the 2012 real estate economy. In the past, agents would suggest price reductions, open houses, more advertising, or simply waiting for the right buyer to come along. All of these are options, but one important option may not be getting presented as often as it should. Why not lease the house until the market improves!?
Homeowners are often reluctant to offer their home for lease, even when they have moved out and the house has sat empty for months. Today’s leasing market is better than ever with people looking for good lease opportunities. Why are leases so popular? Many potential home buyers cannot get mortgages as easily as before. Some have credit issues preventing them from getting mortgages that they could easily have gotten 5 years ago. Some buyers have experienced bankruptcy or foreclosure and they must wait a period of time before purchasing another home. Many times a buyer just needs a few months to finish their loan approval and purchase. However, these tenants sometimes make the BEST rental clients. They are trying to rebuild their credit and the last thing they want to do is get behind on rent, possibly making it nearly impossible that they can ever purchase another home.
Some homeowners are worried that the house won’t be cared for like it should. “What is the tenant destroys thing and it costs me thousands to get the house back in marketable shape after the lease term expires?” These questions can most efficiently be addressed by a competent and reputable property management organization. “What else should we worry about when considering a tenant to help cover the mortgage payments instead of leaving our house empty?”
Some real estate companies offer full property management services. This is the most recommended way to offer your house for lease. When you hire a property management company, you should expect the following services to be traditional and routine in the handling of your home lease:
- Credit and Background Checks should be done on EVERY applicant. No matter the income level, age, circumstances share in conversation, a credit and background check report is essential in evaluating the potential tenant. Of course, this information is not made public and copies cannot be distributed to the parties involved, but it helps the property manager make a recommendation to the homeowner about the worthiness of this party to lease.
- Income documents and bank statements are essential for the tenant to provide to the property manager. Often a tenant thinks they can afford a lease amount that their budget simply will not allow. The property manager will confirm that with other payments (car payments, student loan payments, credit card payments, etc.) that the tenant can actually afford his/her rent on time.
- An Initial inspection of the property for lease is conducted by the property manager and full photo documentation is saved to show the move-in condition of the home. This is a very important step to ensure that everyone sees and acknowledges the condition of the property prior to it being leased. This set of photos and notes will be used to evaluate the property when the tenant moves out as well.
- Proof of utilities and insurance are required from each tenant prior to occupancy. Tenants are responsible for having all utility services in their names so that the homeowner is not responsible for these services during the lease term. Property management firms representing the homeowner like to make sure that the tenant sees the need to have renters insurance to protect their belongings and to provide liability coverage during the lease term. These documents are gathered for the file and retained by the property manager.
- Security deposits are crucial in any rental situation. The normal security deposit is at least the amount of one month’s rental fee. This deposit is retained by the property management company in a protected escrow account. The deposit is used at the end of the lease for such things as damages to the property and for lack of payment or shortages of rent payments. Extra fees can be charged on the front end if the tenants have pets, and if pets are even allowed by the homeowner.
- Periodic walk-through inspections of each rental property are conducted by the property manager. The purpose of these inspections is multifold. This gives the management company the opportunity to see if the tenants are following the guidelines of the lease (number of people living in the property, not smoking in the property, proper care and maintenance of the home, replacing HVAC filters, etc.). Any violations noted at the inspection are addressed immediately so that no deterioration of the property ensues. Inspections can be scheduled at any time with a 24-hour notice. Emergency entry of the property can be done at any time in the event of fire, flood, burglary, etc.
- Collection of rent and other fees becomes the duty of the management company. The homeowner does not have any involvement in making sure that the tenant pays on time. Late fees are collected for late payments, and fees are collected for bad checks. Once a tenant happens to pay with a bad check, they lose their check writing privileges with most management companies and are forced to pay by cash, cashier’s check or money order in the future. Once good funds are secured, the homeowner’s check is issued by the management company.
- Repairs are often a nightmare for a homeowner who is renting a property. An experienced management company has a great list of vendors who work on everything from electrical to plumbing to other handyman types of repairs. When a tenant has an issue that is part of the normal wear and tear of a home, the property manager handles facilitating the repair work and simply deducts the cost from the next month’s rent. Any repairs that are excessive in cost must be approved by the homeowner in advance.
- Lease expirations are handled with care when the property manager inspects the empty property to make sure that it is in the same good shape (normal wear and tear expected) as when the tenants took occupancy. Within 10 days after the exit of the tenants, the security deposit must be disbursed either for damages to the homeowner or to the tenant. If damages exceed the amount of the security deposit, the property management company will assist the homeowner in working with a local attorney to sue for additional damages.
- All advertising and marketing of the property for lease is handled by the property management firm or real estate company. This hopefully makes for a smooth transition between tenants so that the home doesn’t sit empty for long periods of time without being leased until such time as the house is ready to go back on the sales market with the Realtor of choice.
Leasing may not be the solution for every homeowner, but it’s certainly a viable choice for many people. Having a home sit empty is never a good thing for the home itself. A home fares much better with the utilities being used and someone living in the home. Insurance rates are almost always much lower with occupied homes than vacant homes. If a tenant can ease the burden of monthly payments for the homeowner until such time as the home sells in the future, it can be a win-win situation for all parties involved.
Dwight Price has bought and sold real estate in the area since 1980. He is committed to keeping abreast of new technologies and trends in the market and has earned the G.R.I. designation (Graduate of the Realtor Institute), the C.R.S. (Certified Residential Specialist), and the C.R.B. (Certified Residential Broker).