Realtors offer tips for potential landlords

By Maria Allard
C & G Staff Writer

It’s becoming more widespread.

Families who purchase a new home but can’t sell their current residence or get asking price for it are deciding to hang on to their house and rent it out instead.

They’re reluctantly becoming landlords, and local real estate agents have several tips to help them be successful at their new endeavor. For starters, they need to figure out if they want all the responsibilities that come with being a landlord.

“It’s definitely a common practice now for people to look at renting,” said Brian Powers, a Realtor with Keller Williams in Chesterfield, which services Macomb, Oakland and St. Clair counties. “If you don’t have a background in being a landlord, ask yourself if you have the time and knowledge to be an effective landlord.”

If not, Powers strongly recommends hiring a professional property manager.

“A professional property manager has the time, knowledge and resources to manage more efficiently and will do a better job of getting quality tenants that are paying on time and taking good care of the house,” Powers said. “It’s very important you preserve your property.”

David Reese, associate broker with Real Estate One in Troy, which covers all of Oakland and Macomb counties, agreed that a professional property manager is the way to go.

“Most people don’t have the temperament for doing what can be aggravating,” Reese said. “Those calls at 10 o’clock on a Sunday night with ‘my dishwasher broke’ or ‘the furnace broke.’ … How are you going to handle this kind of stuff?”

Of course, it’s the landlord’s responsibility to compensate the property managers for their work.

“You generally pay property managers an up-front free, usually close to one month’s rent,” Powers said. And then they’re compensated during the tenant’s stay. “You pay them a small percentage of the monthly rent.”

Classes aren’t necessary to become a landlord and a license is not needed, but it is suggested landlords check with their city or township to determine if they need to register their home as a rental property and if a building inspection is required.

“The city wants to be notified, so they can come in and make sure the systems are up to code,” Reese said.

When a landlord and tenant enter into an agreement, it’s critical that each side has a clear understanding of the house rules.

“You certainly have to have an expectation up front,” Reese said.

Pets, for example, need to be considered when renting out your home.

“What is your position on pets?” Reese said. “You need to decide what your comfort level is. Many people will take a small dog or cat.”

Reese suggests an inventory checklist to determine if there is any damage to the house already, such as a small drywall crack or a carpet stain. Landlords also need to keep in mind that houses do endure “general wear and tear,” Reese said. It’s best, he said, if the landlord and tenant go over the checklist together.

Homeowners need to make sure their home is properly insured to bring in renters, and landlords and tenants must be clear on the purpose of the security deposit.

“Michigan has specific stipulations on what it can and can’t be used for,” Powers said.

“A security deposit is only for damages that are clearly outlined in state law,” Reese said. “It’s there to protect the interest of the landlord, as well as the tenant.”

Reese advised that landlords should never allow the renter to use the security deposit in place of the final payment. That’s in case the tenant causes damaged in the home or condo that is more costly than the security deposit.

And when looking for tenants, it’s important to ask prospective occupants for a credit portfolio and references. Potential renters whose homes were foreclosed on and are experiencing bad credit status should be up front about that with the landlords.

It’s also vital that landlords study the Federal Fair Housing Laws, “so you don’t inadvertently engage in any discriminatory practices,” Powers said. For instance, if a homeowner doesn’t want to rent to families with children, that could be considered discriminatory, so brushing up on housing laws is mandatory.

“You can’t discriminate,” Powers said.

Powers also recommends landlords lease on a yearly basis rather than month-to-month.

“You don’t want to be constantly having tenants coming in and out of your property,” he said.

Should your tenant be late with the rent or do something against the agreement, it’s recommended the landlord documents that each time.

Because of the housing market collapse and now more stringent nature of securing loans, many people are renting homes and condos instead of buying them.

So, renters should do their homework, too.

“One of the things a renter should do is make sure the (homeowner) is up-to-date in the (mortgage) payments,” Reese said. “We have had situations where renters have been put on notice (that) the bank is foreclosing on their property. I would ask to have a current balance in terms of your mortgage.”

To reach Brian Powers at Keller Williams, call (586) 421-1631.

To reach David Reese at Real Estate One in Troy, call (248) 813-4900.

You can reach C & G Staff Writer Maria Allard at allard@candgnews.com or at (586)498-1045.