Category Archives: Rental Property Series

Modified Theme & Rental Property Conversion Series

I am back at the hull after being away for a whole week. There are a lot of things to get done and as hard as I work, there’s always more to do. Last week, I am afraid, Aspire to Grace was sacrificed in the interest of staying ahead of this tidal wave rolling through.

In the last two weeks, I have had a business trip to prepare for and was gone for four days. I have also started the move out of my office. I am in the process of transferring files to an external hard drive that I can take with me when I move. In another post, I will talk about the remote storage service I will be using called Mozy. It is a great way to secure files against damage or loss to your computer or other physical hard drives.

Finally, I also traveled to Gulfport, MS last weekend and found a place to live. Our unofficial move date is July 17. In an upcoming post, I will let you know what I encountered and how I ultimately was able to find a good deal on a lease. So, stay tuned.

Modified Theme for Mondays – “Money Mondays”

I have come to realize that there are a lot of interesting things to discuss that relate to money that don’t necessarily have to do with making money. For example, this week, I’d like to share with you some additional insights related to the rental of my property, on which I intend to make money. Next week, for those of you that may be moving to a new location, I’d also like to discuss tips on finding a good deal on property for lease in a short period of time.

While I am still mostly motivated by activities that can make me money, sometimes I would like to focus my discussion on other interesting money-related issues, such as ways to save money. After all building wealth involves simultaneously making more money while spending less money.

So, I am modifying the theme for Mondays. From now on Mondays will be “Money Mondays” instead of “Make Money Mondays.” It just seems like a better fit. Please also let me know if you have any other suggestions for money-related content.

Rental Property Conversion Series: Property Has Been Listed, Now What?

My agent listed my house as a rental on the realtor’s database about three weeks ago. Since then, we have had a decent amount of traffic inquiring about the property, but no applications have been submitted. There are likely a number of reasons, but the greatest concern cited by prospective renters has been security in the neighborhood.

I live in an area of the city that has its share of crime, much like many other urban locales. There are very few, if any, areas of DC where crime is non-existent. In fact, even most of the affluent areas are within a one or two block radius of a crime hotspot. Whether it be a drug spot, a spot for prostitution, or an area with a high incidence of robberies and burglaries. You would be hard-pressed to find an area of the city existing in a vacuum immune to crime.

When I bought my house, I recognized that it was in an investment area. My research of this area before I bought my home indicated that it had specific plans for development and it was within 3 blocks of a commercially and residentially affluent area of the city. When I bought my house, there was a $650,000 difference between the price I paid for my house and some recently renovated homes 3 blocks way. These things were catalysts for my decision to invest here. Even taking into account the differences between the houses in terms of features and space, when considering the pattern of development, it seemed pretty likely that the location of my house was slated to appreciate significantly within a short period of time. Six months after I bought my house in 2004, it appreciated $50,000.

As an investor, I expected and accepted the edginess of the neighborhood coming in. But, I must remember that I came in at a lower price so my level of tolerance was much higher. As a higher priced rental unit, however, it understandably does not lend itself well to lower tolerance levels. This is demonstrated in the reluctance I am seeing from prospective renters.

My agent listed our property on the MLS real estate database, as well as Craigslist. I even went a step farther to list our property on the military housing database. Now, three weeks later with no submitted applications, my husband and I are reconsidering whether to sell, or at least whether to put the house on the market as a sale simultaneously with our rental listing. Another factor in our consideration is that our neighbor, who listed his house at full appreciation value, saw a contract for sale on his house within a week.

One of the reasons my husband and I chose to put our house on the rental market is that market indicators showed that the appreciation value on our house had fallen as of the end of last year in the wake of the economic downturn. So, we decided that we would convert it to a rental property in the meantime and wait for prices to bounce back. Now, market indicators are showing that the value of our property may not have fallen as much as we previously thought and that property values have recovered somewhat in many areas of this city.

Now, although there are a few things that will need to be done before listing our house for sale, we have decided to do a sale listing simultaneously with our rental listing. This basically would mean that if we get a credible lease application in the near-future, we will gladly accept. But, in a few weeks time, we now plan to list our house for sale. Thus, if we get the opportunity to sell our house at an acceptable price, we will move forward instead to sell the house.

In the event that we sell, we would take a bit of a hit from the expenses that we put into preparing our house to rent, such as the refinancing costs. But, in the alternative, if we don’t sell, we could still take a hit from having a vacant property. We’d end up paying a mortgage here and rent in Gulfport. So, it may come down to a lesser-of-two evils situation. Ultimately, even if we take a hit on expenses by selling, we would still profit if we sell at or near our target price.

Who said real estate wasn’t a gamble?

MAKE MONEY MONDAYS is a forum to discuss ways in which you can create additional sources of income.  I try to focus on particular ideas and steps you can take to create alternative income and passive income sources.  I have also begun a series of posts called “Rental Property Conversion.”  This series follows my husband and I as we turn our property into a rental property.  I will also research and post other useful information in this category. If you like what you see here, please use the orange icon at the top right to receive my content updates by email or RSS reader.  

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Rental Property Conversion Series: Real Estate Management Walk-Thru

My next step in converting our primary residential property to a rental property is to hire a property manager.  The management agent that I expect to use is with Long & Foster and came highly recommended by a friend.  

Although Long & Foster’s management division is on the higher end of management fees, they offer a comprehensive service.  Since my husband and I will not be in the same state as our rental property when all is said and done, I may be willing to pay a little more for the peace of mind in knowing that proper care will be given my property and my tenants. 

With Long & Foster, I would pay the first month’s rent as commission, with a monthly management fee of 10% of the monthly rent.  The management fee is in addition to other fees for actual services or repairs procured by Long & Foster for the benefit of my property. 

On Friday, the L&F management agent came by and provided a walk-thru of my property wherein she noted things that I am required to do by law in DC in order to rent my property. 

Security Gates

I have three doors on the house, which provide access to the outside.  All three doors have security gates that require a key to lock and unlock the gate.  Pursuant to DC law, this is a fire hazard.  Therefore, I am required to replace the locks on these doors with single cylinder locks – locks which can be locked and unlocked by hand, without a key.  Since it may defeat the security function of the gate if someone can just reach around and unlock the gate with their hands, I could also add a welding component to the lock to hinder access from outside.  I am also permitted to just remove the security doors as I do not have an obligation provide the security doors as long as all main doors are steel doors. 

I will explore which is the least costly option.  I will probably remove the security doors and will need to install one steel door, as the other two are already steel. 

Fire Extinguishers

In DC, I am required to have a fire extinguisher mounted on the wall in the kitchen and in the hallway on the upper level.  This will be a simple installation that I will most likely do myself. 

Ground Fault Interrupters (GFIs)

The agent informed me that, in DC, you are required to have GFIs at all faucets, which would be in the bathrooms and the kitchen.  The GFI is pretty recognizable as the outlet with the colored reset buttons.  What isn’t clear to me is whether  you must have a GFI outlet at each faucet or whether, if there is an outlet near the faucet, then it must be a GFI. 

Really, it doesn’t matter for me because my house already has GFI outlets at each faucet. 

Other Tips

In addition to these things that I am required to do, she also made suggestions in a few other areas.

Make the Dehumidifier Disappear

She took note of a dehumidifier that I kept stored in a room at the back of my house.  She suggested that I keep it out of site when I am showing the property.  Apparently, a dehumidifier may give the impression that there are moisture problems in the home. 

I had already planned to get rid of it.  I’d used it a couple of years ago when I had a leaky roof that caused some moisture problems in one of my rooms.  I have since replaced the roof and rectified this problem.  So, I no longer need it. 

But, apparently a lot of other people in this city do because I listed it on craigslist this afternoon around noon and by 1p I’d already had 4 inquiries about it. 

Hire an Accountant

 She suggested that I hire an accountant to help me sort out the differences in personal taxation when including a rental property business.  As a general overview, she added that I should expect to report rental income as passive income and depreciate certain renovations and capital improvements to the property. 

This suggestion is timely, since I’d already been thinking about hiring an accountant on some other tax issues.  Now I can kill two birds with one stone. 

Insurance

In anticipation of converting my primary residence to a rental property, I am already preparing to convert my homeowners insurance to landlord insurance, which will include coverage for the property building and landlord liability. 

She also suggested that, in the event that the property is initially vacant when I move to MS, that I wait to convert my insurance to ensure the property is covered during the vacancy.  I haven’t researched this yet, but it seems that under a landlord policy, the building may not be covered unless and until there is a tenant in the property.  Thus, if the building is vandalized or burglarized while vacant, the homeowner is not covered under a landlord insurance policy. 

If you are taking on a rental property, whether or not you will hire a property manager, you should research your state’s property requirements for rental properties.  I’ve only had an initial interview with my prospective property manager.  She gave me some very good information and suggestions.  But, before I sign my management contract, I intend to do a bit of my own research on these and other issues that will be important as I get down to crunch time. 

Have you ever dealt with property management for a rental property?  I’d love to hear your stories.  Please share in the comment section, or, you may email me at suprieta@gmail.com.

MAKE MONEY MONDAYS is a forum to discuss ways in which you can create additional sources of income.  I try to focus on particular ideas and steps you can take to create alternative income and passive income sources.  I have also begun a series of posts called “Rental Property Conversion.”  This series follows my husband and I as we turn our property into a rental property.  I will also research and post other useful information in this category. If you like what you see here, please use the orange icon at the top right to receive my content updates by email or RSS reader.  

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Filed under Alternative Income Sources, Make Money Mondays, Passive and Alternative Income, Real Estate, Rental Property Series

Rental Property Conversion Series: Staging Your Property for Show

This week in the Rental Property Conversion Series, I am discussing the next steps to take in converting a primary residence to a rental property.  So far in this series I have covered:

Refinancing Mortgage Loans

Refinance Settlement, Power of Attorney and Escrow

Setting the Appropriate Rent, Part 1

Setting the Appropriate Rent, Part 2

Staging Your Property for Show

Although the term ‘staging’ is often associated with preparing a property for show before a sale, I also recommend taking a lot of the same steps for showing your property to prospective renters.  When you stage your property for show, you are essentially optimizing the presentation of your property.  There are a number of things that you can do to prepare your property for show and I will take you through some of the things that I will be doing. 

I have not yet listed my house for rent.  But, once my property is listed, prospective renters will have the opportunity to do a walk-thru of the premises before making a commitment.  So, I will try to make the best impression that I can make by taking the following steps:

Curb Appeal

The first impression that you make when showing a house is the presentation from the curb to the door. 

If you are like me and you already have some landscaping done in the front yard, you may just need to tidy it up.  I have a very small front yard, which has a sod- grown lawn and small evergreen plants that border the walkway.  Over the past year or so, the front yard has been somewhat overwhelmed by weeds and a lot of the mulch that had been used to isolate each plant has washed away. 

The simplest thing that I can do right now is to uproot the weeds, replace the mulch and cut and trim the grass and edges.  To keep my costs down, these are things that I will probably do myself. 

But, if you feel that you do not have a green thumb or if you have a much larger front yard to tend, it may be worth it to hire a professional landscaper.  It is probably worth the investment to make a very good first impression. 

Other things that should be done to spruce up the entry way to your home is to clean and refresh paint on the window sills and doors, sweep the walkway and clean or replace patio furniture.    

Painting and Finishing

Once your prospective renters make it into the property, what will they see?  I recommend a fresh coat of paint and finishing details such as patching up marks and scratches on the walls and cleaning carpets and floors.  Walls and floors take up such a large area in the room.  They are your canvas for other decorative details. Marks and blemishes look bad and will detract from the other details of your presentation.

When painting the walls, it is best to use neutral colors.  Colors such as whites, beiges, and yellows are very neutral.  There are also a series of other colors that, when diluted by white, are barely noticeable as tints.  Stores such as Home Depot will allow you to customize colors according to their color specifications.  They have colors throughout the spectrum that can be diluted to almost white. 

In addition to painting, you may also want to finish or refresh items that are not in their most presentable form.  For me, that includes things like the caulking on the tub in the master bathroom.  The caulking has corroded over time and will need to be refreshed before the house is shown.  Other finishing tasks might include spot cleaning, replacing light bulbs or filling in large empty spaces.  For example, if you recently took a large table out of a room, you may need to place another piece of furniture or some other item in its place to maintain balance in the room.    

Repair Work

This may not be imperative for your walk-thru.  Some things that will need repair may not be obvious to visitors walking through the property.  The most important repairs, however, will be the obvious ones – things that are most noticeable to the eye.

Examples include large cracks in the walls or ceiling, broken doorways, or broken windows. 

Less obvious repairs should definitely be disclosed and repaired before your tenant moves into the property.

De-clutter and Depersonalize

Two of the most important things to do before your property is shown are easily the least obvious to the property owner.  If you are like me, you may have piles or clusters of things that you keep out in the open for ease of access or because you do not have enough storage space in which to keep them. 

For the purpose of showing your property, you are advised to clear away all piles or clusters of papers, clothes and other articles.  The general rule of thumb is that there should be as little of you in the property as possible.  Present your property as you would imagine finding a hotel room or model home.  For the most part, the only things that should be apparent are furnishings and minimal creature comforts that would make for comfortable accommodation. 

MAKE MONEY MONDAYS is a forum to discuss ways in which you can create additional sources of income.  I try to focus on particular ideas and steps you can take to create alternative income and passive income sources.  I have also begun a series of posts called “Rental Property Conversion.”  This series follows my husband and I as we turn our property into a rental property.  I will also research and post other useful information in this category. If you like what you see here, please use the orange icon at the top right to receive my content updates by email or RSS reader.  

 

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Filed under Make Money Mondays, Real Estate, Rental Property Series