Renting a property is neither fun nor easy. That’s what I got from interviewing a young Denver couple who have been renting a property out since 2005. I was interested about the experience of renting a property, and I wanted to get a firsthand account of what it’s like, what I’d need to do, what are the challenges, and what the rewards of renting out a property are.
Jake & Kathy: A Young Couple Wants an Investment Property
Out of privacy concerns, I changed the names at the request of the interviewees, but all other facts are real. I met with Jake, whose wife, Kathy, is a realtor. Jake and Kathy have two rental properties, one out of state. I only talked about the local property. They were interested in acquiring investment properties, so they actively sought out properties they could afford to rent out. Jake and Kathy found a two-bedroom apartment in foreclosure, and now rent to section 8 tenants, who have their rent subsidized by the state. As of this writing, the unit is available due the eviction of the most recent tenant; more on this later.
Where to Find the Paperwork to Rent a Property
Jake and Kathy went online and found a draft of a lease to use for their property. With the help of one of Kathy’s real estate colleagues, they “tweaked” the lease to fit their property and needs. Aside from that, Jake said, “We didn’t have a blueprint. We didn’t follow a preset plan.” Jake and Kathy in the spirit of American ingenuity, and with a little help from a person with experience, started out renting in a completely DIY manner.
How to Find Renters
Jake said finding a renter is simple. They place an ad, have a renter fill out an application, do credit and background checks, and if all that works out, they rent the property. Since they owe money on the apartment still, they need renters to help pay for the place. Difficulties with tenants can and do come up along the way, as can maintenance issues and other “frustrations.”
Rental Property Challenges
Renting out a property is a challenge, especially for a couple people just starting out. The property was a little outdated. Over time, things would break and require maintenance. Jake got tired of being the “Mr. Fix-it handyman.” He said, “just because you own a home to rent, doesn’t mean you know how to fix it, but you have to anyway.” Jake had to learn how to fix things he’s never fixed before. If something breaks, as landlord, the responsibility comes down on Jake and Kathy. There was a lot to learn.
Moreover, on the business side of a rental property, Kathy got tired of dealing with late rent and with the challenges of other human aspects of renting a property. In other words, owning a place to rent doesn’t automatically equip you to deal with the personalities of some tenants. Things like rent not arriving, trying to track down the tenant and waiting for a response were not out of the ordinary.
Indeed, Jake and Kathy recently had a nightmare tenant. The most recent tenant fell off the face of the Earth, for all intents and purposes. Eventually Jake and Kathy had to evict. Since the tenant disappeared, they also had to shell out $400 for the sheriff to break down the door, and for laborers to empty the tenant’s belongings out of the apartment to the parking lot. Then the locks had to be rekeyed.
The red flag came when the tenant had the utilities shut off in the unit for some reason.
“The utilities were paid as part of the rent,” Jake said. “She may have thought she was saving money, but her rent wouldn’t have changed.” Jake explained that section 8 requires the utilities remain on the duration of the lease. When she shut the utilities off, the Housing and Urban Development department (HUD) tried to contact her and tell her she’d lose her subsidy. When they weren’t able to contact her. HUD contacted Jake and Kathy and said in essence that the rent is not going to be paid because the tenant shut off the utilities and is now unresponsive.
Jake and Kathy had no choice but to seek eviction, rather than have a tenant who couldn’t pay rent. After the ordeal, the door was re-keyed, and they’re now looking for a new tenant. Over the years, they have learned some lessons though. One of them is that there are people better equipped to manage properties than property owners.
Outsource to Property Management Company
Jake and Kathy found a property management company to deal with the day-to-day problems of what is essentially running their own rental property business. The property management company makes and takes the phone calls. They send out a maintenance man when necessary, and really they only communicate to Jake and Kathy when there are added expenses, or something out of the ordinary. They found that the property management company was really affordable, and easy to work with, just receiving invoices on expenses.