So I purchased a great townhouse when the market was good for $142,000. It needed very little work, just some fresh paint and all exterior items were covered by my association payment. I thought I got a good deal on a place that I would spent a good number of years in. Well....just a few months later, the housing marketing started to tumble downwards and I met the love of my life. Since he had multiple dogs at the time, there was no question when it came time to move in together that we had to cohabitate at his house. My association would only allow for either two cats or one small dog. I originally tried to sell the property for a minimal loss but the way things were, after a year on the market, it was clear I was either stuck with the property, would have to rent it out or would be looking at a $25k+ loss.
Then my real estate agent, Tyler from the Minnesota Home Team of realtors, introduced me to a rental agent, John from CPM Property Group, who took the time to meet with me, discuss my property and how it would stand in the current market. I couldn't believe that I could rent out my townhouse for just over the same amount I was paying for my mortgage + association payments. With minimal costs, my property was listed and he had tenants in within a matter of weeks. Here's their online list of how they help owners manage their rental property.
What are the costs of using a rental company:
Now obviously all rental companies will be different but I can give you my experience. The initial costs of getting a rental up and running was fairly minimal in the grand scheme of things (75% of just the first month's rent) and my monthly costs for John to maintain the rental is only $75. This covers handling all tenant inquires, emergency needs, tenant payments and late fees along with periodic inspections of the property. His services include necessary repairs and maintenance of the property as needed up to $500 without having to consult with me. If a needed repair/replacement comes up, he will work with his contractors to get the job done and then simply deducts the repair cost from our next rent payment along with providing an description of all work that was completed. Beyond $500, he would consult with me on how to handle the situation.
I also love how John helps to protect my property and try to ensure it is never sitting empty. He has the tenants sign off on a clause that they agree to give a minimum of 60 days notice before vacating the property and they agree NOT to leave the property between the months of November and March. For those of you that don't live in the super cold climates, this is great for protecting the property from frozen pipes and appliance damage because of it. In addition to following the rules of my association, I also have a rule in place that he is not to rent out to anyone that smokes.
What's the catch?
Honestly now that I've been renting out for over 2 years now, there isn't anything about that I didn't know about before we signed the paperwork. The entire contract was only 10 pages long and easy to read and understand. How often can you say that? I actually read the entire contract before signing it and it was in REAL English, not "lawyer English".
Of course there is always the risk of having bad tenants that destroy your property so be sure you are comfortable with your rental agent and their standards for choosing tenants.
And some property owners tend to forget that large issues can come up and you will need to be ready to cover them. So it's always a good plan to have emergency funds available if things come up like needing to replace a furnace, dishwasher, air conditioner, etc.
The plan for our current home and how we benefit from renting out our properties:
So for a few reasons, we will not be looking to sell our current house and are working on fixing it up to rent it out when we decide to move out and spend our lives on the road. We see a few positives in owning multiple rental properties:
- It will provide us with a small income stream
- Helps us pay off our mortgages and build more equity in our properties
- After 2 years of having renters, the mortgage no longer counts against us if we were to look to get another loan
- Always gives us a place to come back to if we decide to return home
Do you own rental properties? What has been your experience?