Homes are not selling well here as everyone is painfully aware and many owners are moving their vacant homes into rental to generate cash flow and provide some maintenance by means of occupation. As with the 87 unsold homes on the market (43 of which are new), many homes that are for rent are new or nearly so___0 to 5 years as we say in real estate.
Sally and I started our Batchelder Property Management company for this reason. We each had to earn a broker's license to do it because management involves another set of skills not included in selling real estate. But the expense and effort have proven well-spent. We are managing 14 homes as I write this, with three or four more in the pipeline, that is, owners we are working with who are considering our lease program.
Like many other property managers we do not handle month-to-month rentals. There is not enough security for the landlord in that type of arrangement, so we mainly do 6 and 12 month leases. This also seems to provide more stable tenants and so far we have not had one break one of our leases.
Managing a home starts with a maintenance inspection. We use a local man to help us identify minor things and cleaning items that the owner may not have fixed before putting it up for lease. When the home is move-in ready we advertise it on our blog and website and recommend classified ads paid for by the owner in the local papers. Then we put up a sign with a flyer box and take photos (and sometimes a video) for use in our online advertising.
When people call we show the home just as we do homes for sale except there is no lockbox, we are the only ones who have access. The application we give is written by the attorneys in our state association (with all the built-in legal protection that implies) and we request supporting documents as well, such as pay stubs, credit report with FICO score, and a resume-like page of who the applicant is and why he or she would make a good long-term tenant.
If the income seems strong (we look for a front end ratio of 30% or less ___ rent to income) we start calling the employment and landlord references. Then, if all that turns out as well we present our findings to the landlord and they make the final decision.
It's an interesting process because many times while credit may be weak for instance, there might be other mitigating factors that balance it out such as unusually high income or strong references. That's why we encourage applicants to really put together a complete picture when they apply.
The process also weeds out prospects an owner might not want. One of the "triggers" that does that is requiring pay stubs. More than once we have received a very nice-looking app that did not include proof of wages. When we request it the applicant just vanished____completely dropped off the radar, which is a sure sign that it might never have worked out. Not requiring proof of income was one of the dangerous practices lenders were doing with the so-called "no doc" loans by the way, which was part of the reason for our current real estate mess.
The maintenance agreement stipulates that we visit (by appointment) in six months to make sure everything is working alright and it has the side benefit of allowing us to view how well the tenant is maintaining the home. The law is very strict about what is called "quiet enjoyment". A tenant has the right to occupy the premisis and not be bothered by the landlord or his agent without due cause. Unannounced inspection visits for example expose the owner to litigation for this reason.
But if a tenant does fall behind in their rent, cause damage or complaints by neighbors then we step in and do the dirty work to get them in line or out of the premisis. That's part of our contract with the landlord. That contract by the way typically lasts three years, enough to outlive three 12 month leases although it can be cancelled by either party with written 30 day notice.
So we try very hard to find good people and people who will not cause problems for the owner or the neighbors. I know there is concern about renters and for that reason we comply with every single requirement in the CC&R's (we even provide copies of relevant sections to the tenant and a list of our rentals to the LSPOA). If done right we believe a good tenant can be every bit as good as a new neighbor who just bought the home.
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