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Saturday, November 29, 2014

How to Rent a House - Tenant Turnover in Rental House #1

After a very long tenancy my tenants in rental house #1 had to move. I was truly sorry to see them go, not just because of the vacancy factor but because they were good people, we got along well, they took care of the house and they liked the house. But, their personal circumstances changed and they had to move on.

It is common to hear horror stories about investors having to deal with horrible tenants, that were a pain to work with and left the house in terrible shape. What you don't often hear is the opposite of that. And mine was such a story. So all you prospective landlords out there understand that being a landlord can also be a pleasant experience!

Now it was time to deal with turning this house around and getting it ready to rent again. 

Since it had been so long since I had to do that with this house I had to put together a plan on what needed to be done. My previous vacancies experiences were with rental house #2 which eventually ended up in an eviction and last year I had to rent out rental house #3.

The first thing you need to know is that there is always work to be done to a house when a tenant moves out. The work might range from little to a lot but there is always some work to be done. Bear in mind that the better you stayed on top of the tenants while they were there making sure they kept up the house and you also kept up the house, then the less work you have to do when they move out, the less money you spend and the quicker you can have it back on the market.

So once I confirmed the tenants were moving out (I require a 60 day notice) I had to put together a little plan of everything that needs to be done to get the house rented again. It goes something like this:

  1. Confirm with tenants move out date and ensure they understand rent is due for the month they are moving out and that security deposit cannot pay for last months rent (ask me how I learned this…)
  2. Offer to do a preliminary walk through of the house so that you both agree what needs to be taken care of before they move out
  3. Send tenants letter with move-out procedures (link to PDF file)
  4. Make a list of repairs and/or maintenance items you will have to take care of once they move out. Typically you can expect at least some of the following:
    • Interior
      • Steam clean carpets
      • Paint - this can be touch up paint or whole house
      • General cleaning - from appliances to baseboards, windows, closets and all those nook and crannies that tenant did not clean on a regular basis
      • Replace toilet lids (pet peeve of mine)
      • Ensure everything is working
      • Change air filters, batteries on smoke detectors, lightbulbs as needed
      • Windows are working well
      • HVAC system maintenance
      • Garage door maintenance
      • Air duct cleaning
      • Deodorizing/sanitizing (if they smoked or had pets)
      • Proper operation of all appliances
      • Flooring repair and/or replacement. Replacement is more typical for carpets which are more inexpensive to replace but before you think replacement I have seen some carpet cleaners do miracles so consider repairs before replacement.
    • Exterior
      • Pressure wash exterior or touch up paint or worst case scenario whole house paint. You might not HAVE to do it but if the paint is weathered enough this might be a good time to get it done
      • Clean gutters
      • General landscape cleanliness - pruning/trimming trees and bushes, taking down any overhanging trees or limbs or dead tress that could cause trouble in the future
      • Window screen repair
      • Chimney sweep/cleaning
      • Changing locks - this is mandatory in my book
      • Proper operation of all exterior lighting
      • Pest control
      • Siding repairs for those boards that have deteriorated over the years this includes caulking any gaps or nail holes in the siding

 I don’t mean you have to do all of these repairs but you should keep this list in mind for two reasons; 1) Some of these repairs are just part of maintaining a home over the years and they are best done on a vacant house and, 2) They will make the house look and feel better making it easier to rent again or resell it if you choose.

I treat this no different than any of my rehab projects so I put together a schedule and a budget. The schedule is for everything that needs to happen and when. The budget is so that I prioritize my repairs between the "must do" and "should do". Here are some of the things that I consider:

  • About 15 days before move out I get comparables of what similar properties are renting for in the area. I use the Multiple Listing Service (MLS) as well as Craiglist and other websites for this. You can also contact a real estate agent and he can help you gather this information. 
  • With about 7-14 days before tenant move out put a FOR RENT sign in front of house
  • About 7 days before move out I start advertising the house online
  • With my list of repairs complete I figure out if there is work that I can do or hire a contractor(s) or a combination of both. In my case I hire most everything out so now that I got a work plan it’s time to call my guys and get bids from them
  • Do final move-out inspection with tenant. Go over the house with a fine tooth comb and document any damage and excessive wear and tear in the house. It doesn’t always means the tenant will pay for it but you want to document as much as you can
  • Ensure tenant leaves nothing behind. He has to leave house the way he found it so you should not be responsible for removing anything they left behind.
  • Put together a schedule of work. This is no different than what I do for my flips so it is a rehab project at this point but with more urgency because the longer it takes to turn the house the more rent you are missing out on!!

In the next post I will go over the actual repairs I had to do to this house, cost, scheduling etc. and then marketing the house to get it rented again.

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