I recently finished a real estate scouting trip with an experienced rental property owner and another newbie. It gave me the idea to ask two friends, who happen to be real estate queens, out to lunch to pick their brains on renting homes, finding a great home, and lessons learned.
I invited these ladies because both have homes locally to where I live. It will be more helpful than stories of homes the next state over, and both have leased out properties for many years.
Experience matters in real estate
Years of experience means they have had more time to make mistakes I hope to avoid (though it is not always possible). To keep things simple, I’ll refer to one as Kristin and the other as Rachel. They have slightly different strategies in the market.
Who to ask for real estate advice
Personal advice, relevant to your area, is worth the price of lunch or dinner. You might think you don’t know anyone who rents homes to ask for advice, but you might be surprised.
Ask around at
- your place of worship
- the office
- your gym
and see if anyone knows anyone who has rental properties in your area.
Even if you don’t know the person well, I think most people are open to sharing lessons learned and experience. It is flattering for someone to ask your opinions and advice, so don’t be afraid to ask a friend of a friend or old acquaintance to get some guidance.
Here are some things I learned for the price of soup and sandwiches:
Never Rent to Family / Co-Workers, etc.
It might seem obvious to some or harsh to others, but it appears to be a good rule of thumb. Especially when you are starting out and need to make money from day one.
Stories I heard say those who know you tend to be the ones that do not pay the rent on time or do not take care of the rental property. This situation then makes things awkward at family functions or work.
If you can’t afford to rent a property for free, then avoid renting to people you know. They may seem responsible and trustworthy right up until they move in.
Average Rents in the Area
The ladies were able to give me information on the rents they were able to charge in two areas near where I live. Rachel typically rents near a large college, while Kristin is looking in an up and coming area of North Dallas.
The rates they charge help me get an idea of the price of home I should consider – Remember the Rule of the 1%.
Kristin includes lawn service in her rental price. This way she is assured that the yard will be taken care of, and no HOA or city fines are levied on the property. At another home, she replaced the front lawn with gravel, which of course, doesn’t require mowing, and only needs weed killer sprayed on a few times per year.
Rachel includes a lawn mower with each house and has them serviced occasionally. She included notes on lawn maintenance in her lease.
Where can you get a reliable lease? One website you can use is Law Depot. You can either pay $100 for a year and as many documents as you need or pay between $10-$40 per document. You can also search the web for a lease in your state, just be careful to find a reliable website.
Kristin uses a standard lease she received from her realtor.
Rachel, who rents near a college has slowly updated her lease as issues have come up with renters over the years.
For example, one part of the lease states that if there are ants in the house, the property owner will take care of the situation. Unless the reason the ants are in the house is that food has continually been left out on countertops, floors, etc. Then removing the ants becomes the responsibility of the tenants.
I am looking forward to reviewing her custom lease and seeing the other adjustments. If you work with a realtor, you can also get a standard lease from your agent. They might be able to help you find renters and do background checks as part of their fee of the house purchase.
In addition to a good lease make sure you protect your assets
How to Find a Rental Home To Purchase
As I mentioned, Kristin uses a realtor she met in her neighborhood. This realtor can set a search that frequently runs so you can get updated house searches. Realtor.com and Zillow are great but sometimes they are a bit out of date. Kristin gets an email with home listings every time a home comes on the market that fits her search criteria.
Rachel prefers to house hunt on her own but does have a relationship with a local realtor. The realtor is flexible and will open homes for her to see and helps her with the closing process.
And don’t forget For Sale By Owner. You can pay a realtor a flat fee to help you with the sales process and still get a great deal.
I had a great lunch and felt like I learned a lot. Also, I am thankful to know people who will help me out with opinions and advice as I move forward.
I asked Kristin to introduce me to her realtor and will soon have a call to get a daily search set-up for me. I’m ready to start looking around in my area and see some houses.