Have you ever thought about turning your home into a rental unit?
Well before you make up your mind, follow along with this weekly Renting Series that provides you with some honest information and lessons learned from a military wife turned landlord. I will give you the good and the bad and hopefully my previous and ongoing experiences will provide you some insight in order to make an informed decision. So here we go:
Note: Every post will begin with what we in the military call The BLUF (Bottom Line Up Front) It's a quick, rapid fire snapshot of information.
The BLUF: If you are going to own a rental unit you should:
1. Have a financial backstop that equals 6-12 months of your mortgage payment.
2. Get ahead and stay ahead of your problems.
3. Learn to rack and stack priorities / problems.
But before we take a deep dive into the do’s and don’ts of owning a rental unit… here is the backstory.
For our little military family, our lives seem to have been measured by moves. We have lived in base housing, rented and owned homes and, to be honest with you, I prefer owning my own home. I don’t necessarily enjoy the problems that come with owning a home (who does) rather I enjoy the freedom of owning a parcel of land that is mine – or at least when I pay off the mortgage it will be mine.
My husband and I have owned three homes and while we have sold two, the last one we opted to rent. I do not mind being a landlord – I just prefer not being a landlord. The reason my husband and I chose to rent our house is simple – we wanted an investment and a tax deduction. As a military family, we are constantly on the move – or waiting to move or just finished from moving. After 2 / 3 years in the same place – I am ready to move on. Terrible, I know, I know…I cannot help it – it is my militarium rhythm; my two-year itch, my “what’s next” moment. Perhaps you can identify, perhaps not – either way it is safe to safe after 10 years in the military we wanted to have something rather than nothing and that something is a rental property.
We were accustomed to selling properties but not renting, so this was a bit of a learning curve for us and I hope in some small way – this informational series helps shorten your learning curve. Naturally, everyone wants to make a monthly profit from their rental unit; as well as cover the cost of necessary expenses associated with routine maintenance – however, this should never supersede your three main goals to: Have a financial backstop for your mortgage, Get ahead and stay ahead of problems and finally make sure to rack and stack your problems / priorities. I will admit that I am not a fan of Home Management Companies simply because I prefer direct contact with my renters and my investment. This does not mean I do not find value in Home Management Companies – it just means that I prefer direct communication with my tenants as well as the service providers who assist me in maintaining my investment. By coordinating all the services for my rental unit; I hear about problems quickly and therefore I can handle them quickly.
First things first – your backstop. To have a backstop of 12-15K solely for your mortgage payment is a huge amount of cash just sitting and waiting to be used. However, make sure that you take the time to invest it wisely while still having access to funds. Do not underestimate the value of this step – it provides you with peace of mind that should your renter abandon their responsibility to their lease, or your home is competing in a flooded rental market. You need that safety net.
Get ahead of problems and stay ahead of problems all boils down to maintenance, maintenance, maintenance. This means regular maintenance on your furnace, ac units, hot water heaters, pest control, landscaping, changing out fire / CO2 detectors, roof inspections, garage door safety check as well as appliances that came with the home. Do not wait for a problem to become a disaster. The hundreds you spend maintaining could very well save you from the thousands you may spend replacing. Just do it.
Racking and stacking priorities are also something that I have learned to do. As much as I would like to send a handyman out to caulk around the bathtub – I may opt to wait until there are a couple of items to do in order make sure my employee’s time and my money are utilized effectively and efficiently. Every renter is different. You may renters who panic over the smallest of problems or those who try to tough out a difficult scenario and do not communicate at all. This is where consistent communication and the eyes of additional service men and women can help. The folks who help me maintain my investment are committed to insuring that my property is safe and well take care of. The moment there is a problem or concern – the first person they are calling is me. – and that is exactly how it should be.