If you’re just joining us, in part one I explored the thought process second home buyers should go through before making a purchase. Essentially, location matters for multiple reasons, and along with condition of the property, will drive what you can charge for rent. Here in part two, I’ll fill you in on what it takes to be a landlord.
Being a Landlord
I’d never been a landlord before, and back in the pre-internet days, I used a Realtor to rent my property (the same one who sold it to me). What I found was that a Realtor with 30 rental properties can’t really play favorites. After a first year where I was rented for four months, I ditched the Realtor and took over bookings myself.
It’s a whole lot easier today. Back then, I arranged for pictures, placed the classified ads in the local newspaper and waited for the phone to ring. TIP: Having a cell phone number with the same area code as the property made a difference.
For many years, I did it all myself remotely. I secured the booking, managed the leases, arranged for housekeeping and any repairs that popped up. Regardless of what went wrong, I had the phone number of someone who could fix it. Washer dies? Sears will deliver, install and haul away the old. Compressor blows in the fridge? Sub Zero authorized repair people. Toilet leaks? Plumber.
Part of being a first-time landlord was learning on the job. Remember the building manager from my renovation? She was invaluable in giving me names of tradespeople with experience in the building.
I now have a little black book of contacts should anything go wrong.
Maintenance Never Ends
If you think that nothing goes wrong, you’re wrong. Likewise, maintenance needs to be done too. Things wear out or break. In the past year I’ve had carpets steam cleaned (annually), dryer lint trap repaired and toilet flush flapper replaced. Last year I replaced the range.
When things wear out from no fault by the tenant, remember to be generous. If the washing machine dies, toss the tenant $100 for having to let the delivery guys in to replace it but also because they have to use the laundry room in the basement.
Aside from unexpected maintenance, every year I replace all linens, pillows, and throw rugs. I do this for a few reasons. First, you’re selling a good night’s sleep. Second, I’m haunted by the story my Realtor told me of a client/owner who when told their sheets needed replacing (so threadbare they literally split in two) replied, “Can’t you sew them up?” A decent set of cotton sheets is what, less than $100? And finally, replacing pillows during my annual stay means I get to sleep on the new ones.
Generating the most rent means keeping your property in good condition. We all know when we stay in a hotel that’s poorly maintained. With Yelp and TripAdvisor, we all know before we book it. Happy tenants are often return tenants.
Minimum Rental Period
Some areas are weather-limited in the times of year they’re rentable. But another aspect of renting is to understand the length of tenant you can and wish to attract. My second-condo building allows for a minimum one-month rental. At the time, I worried that a month was a big commitment and limited the pool of renters (who takes a month-plus vacation?). In some ways it is limiting, but it’s also a godsend.
First of all, monthly tenants tend to be older, retired, or temporary workers. Because of this, they’re generally low wear-and-tear tenants. They’re not weekenders wanting to sleep four in a bed, throw parties, and trash the place. With monthly tenants, you have a max of 12 move-ins and move-outs per year, so there’s less wear-and-tear overall. Daily rentals get tatty fast and take a lot more work to keep clean.
Monthly tenants also require less management and less tenant-seeking. Most years I have two-to-three tenants staying multiple months.
If you’re not concerned with carving out some time for yourself, you could sign full-year tenants for even less hassle (which I did when I was traveling for work more frequently).
If your property is a free-standing home, you probably have the luxury of renting any way you want (although Airbnb can be a way to tick off neighbors … neighbors you’ll need in emergencies when you’re not there). Properties in condominium complexes will have rules on rentals. In my area, building rules run the gamut from not allowing rentals, allowing them after a few years of ownership, all the way to one-, six-, and 12-month minimums. None allow daily rentals. Because of this, the neighborhood retains a residential feel with some added vibrancy from the well-behaved tenants.
Ad-hoc or Sequential Renting
There are two ways to rent a property. You can open a year-long calendar and let people book what they want ad-hoc. Alternatively, you can book sequentially where you only look for a tenant when your current tenant’s lease ends. The method you pick has a great deal to do with your rental minimums. If you’re seeking daily tenants, sequential is almost impossible, like a hotel, you have to open the whole calendar – looking for a new tenant every few days is madness. However, longer-term tenants can be booked either way. Management firms operating in my building generally offer ad-hoc.
Also, if you’re in a high-demand, one season location, opening the calendar may be the way to go. My place is in a year-round location and I seek longer-term tenants, so I’ve always done sequential. I feel it minimizes dead months where someone may want two months and you only have one available.
Sequential may take more nerves though. As a lease ends, you’re staring into an abyss until your phone rings. Sometimes it’s seamless with a new tenant calling early in the current tenant’s lease. Sometimes you have a dead period where you’re empty. Sometimes, when you have single-month tenants, you’re constantly looking for a new tenant for the following month.
It’s times like that where experience comes in. This year is the first time in a few years I’ve had a dead month. You begin to fret that you’re stuck with the running costs this month, next month and forever. Experience calms those nerves. Lo and behold, halfway through the dead month I picked up a tenant that takes me until March 2019.
Regardless of the booking method you choose, you’ll be white-knuckling it for a while until you get your sea legs dealing with the uncertainties.
Just remember, you will have dead spots in your calendar — they’re unavoidable. The goal is to minimize them by understanding the market you’re in. If you’re using a managing agent to deal with all that, fine. But you’ll still need to be satisfied they’re doing the best they can. Even though I was burned by a management company nearly 20 years ago, I still secure all my bookings before turning tenants over to my local management company. They get less money from me, but they don’t do the heavy lifting required by more hands-off owners. And, when I have more interest than I can handle, I pass leads to them for their other clients. Win-win.
Buying a second home turned out to be one of the smartest things I’ve ever done. It’s appreciated well over time, and it gives me options for my rapidly approaching retirement. If you want a second home, it’s like anything worth doing. Do your homework.
All in all, I’ve had three tenants who I negatively remember. I had a trust fund baby who’d never taken care of anything in his life (and his a trust attorney used to cleaning up his messes). A younger betrothed couple thought it would be a good idea to go to a stripper bar one evening. When they returned in the wee hours, decided to have a knock-down, drag-out shouting match in the hallway – she was angry he was looking at the dancers (who couldn’t see that coming?).
I’ve never been stiffed on the rent.
Remember: When I’m not stirring up trouble in Dallas, Texas or Honolulu, Hawaii for Candysdirt.com and SecondShelters.com, I’m off scouting interesting locations for a second home. In 2016 and 2017, the National Association of Real Estate Editors recognized my writing with two Bronze (2016, 2017) and two Silver (2016, 2017) awards. If you’re a Realtor with second home clients who’d like me to feature their journey, shoot me an email firstname.lastname@example.org. Be sure to look for me on Facebook and Twitter. You won’t find me, but you’re welcome to look.