Because I work in property management and blog a lot about property management topics, I'm constantly immersed in articles and daily experiences about the subject.  But some things are so common in my practice that it's easy to forget that what's second nature to me is always going to be new and insightful to someone new to the subject.   Don't get me wrong, I'm not trying to blow my own horn, but bear with me.  Recently I saw an article, 8 pitfalls for new landlords, which summarizes several really great points that I've written about before  in various forms- and that I talk about with property owners literally every day in my work.  It was great to see the information with fresh eyes, but it also reminded me that the best basic knowledge is not only universal, but that it's good to remember that it's always new- and useful- to someone else.

 I actually think the article is written in too much of an alarmist "watch out" tone, and  would reframe the information as "what you should know" as opposed to seeing it as "pitfalls", but that's just my frame of reference after 12 years in the business.  Either way, it's information that every landlord should take time to understand.  I'd summarize it like this:

Run a rental as a business, not a hobby.  Renting out your home is a business, and by becoming a landlord, you have to be cognizant of tax, insurance, and local landlord tenant law matters.  A rental is considered an investment property, which has different tax implications than a primary residence; rents collected are considered business income and must be reported to the Internal Revenue Service. On the flip side, certain repairs and upkeep, in addition to mortgage interest, can be deducted as business expenses.  Consult your CPA for advice on rental property income and expenses.   Your property insurance is also handled differently for a rental, and you'll need to let you provider know that you're renting it out.  Finally, a host of federal, state and local regulations cover the rights and responsibilities of both tenants and landlords, and rental properties need to adhere to these (more on this below). 

It's well worth hiring a professional property manager.  This sounds like a pitch from me, but even this article points out that experts recommend talking to - and preferably hiring - a property familiar with the business of effectively managing residential property.  Try linking to the local affiliates of the National Association of Residential Property Managers to find a property manager.   Property managers with a professional affiliation such as this have sound expertise in the local rental market, advertising, tenant screening and lease management, and can easily save you as much or more than their fees by renting your property faster and managing it more effectively than you may be able to on your own.   To make this more meaningful to owners, I always use the "what would you do if your tenants suddenly stopped paying rent" scenario.  Independent owners tell me they usually would a)panic, b)try to figure out what their options are, or c)panic. Property managers know exactly how to avoid this in the first place, and how to handle it if it should happen, as well as a myriad of other situations like repairs and maintenance, pets, etc.

Don't confuse 'rent' with 'mortgage'.  It's easy to assume the rent should cover the mortgage since it's what you paid to live there, right?   The two aren't related, and it's the most common misperception new landlords have, say property managers in the article. The mortgage is an agreement you made with the bank based on the sum of the loan, the percentage you put down, your credit history and the market valuation of the property at the time of sale, none of which factor into determining rent, which is entirely driven by local market competition and conditions-  supply and demand, basically.  A mortgage and a rent also buy different things- a mortgage pays for an investment, while rent pays for a roof for a specific period of time with none of the financial or tax benefits of ownership. 

Don't skip background and credit checks.  I don't like to be cynical, but bringing in a renter just isn't like sharing a cab with someone.  I always use the "Nice girl from Wichita" analogy, because who doesn't like someone like that?  Sometimes, however, "from Wichita" turns out to be "running from creditors and not able to hold down a job".  It's just good practice to always screen for credit, criminal and rental history, even when someone seems nice enough to have coffee with.    When entrusting what's likely your biggest financial asset to a stranger, the rule is this: screen, screen, screen.  Managers say you want to know whether an applicant has been evicted in the past; whether he has a history of criminal behavior that could jeopardize you, your neighbors or your property; and whether s/he earns enough to cover the rent and living expenses.

Handshake agreements don't mean anything.  I've always lived by the rule that "if it isn't in writing, it doesn't exist".  A written lease is always a must, and it must cover every detail of the rental agreement.  Who pays for the utilities, who is responsible for mowing the grass, when is rent due, and what happens if it's ever late, how many people can live in the home, and how many cars can they park outside?  It's all got to be in writing or someone will always have misunderstood expectations.

Don't skip needed updates to your home.  Just because it will be a rental, don't think that it doesn't need to show really well.  It may seem counterintuitive to upgrade things for a renter, but the fact is that nice homes attract nice renters. "If you don't have a well-maintained home, you're going to get the tenants who don't maintain a home," say experts in the article . "A majority of tenants want a nice place to stay, and they're going to keep it up. There are a lot of excellent people who rent for years and years and they take excellent care of the property."

Federal, state and local requirements, including Landlord-Tenant law are important.  As an owner in your own home, you're kind of free to take as many risks as you want.  With tenants, however, you become responsible for their safety, at least as it relates to the property -things like structural damage and environmental hazards (radon, carbon monoxide, lead paint, mold), and you have to take reasonable measures to respond to renters' concerns about unsafe conditions, even neighbors' suspicions of potential criminal activity on your property, say experts.  This is an area that a professional property can really give you peace of mind, since they are licensed,  well versed in the various requirements, and can navigate such issues effectively.

Plan your work then work your plan.  In other words, don't try shortcuts on the above once you've decided to rent and how to go about it.  Be conservative when anticipating how long it will take to rent and what the rents, and costs, might be.  Markets are fluid, but it's better to have a solid plan and stick to it than to get nervous and rent hastily without screening or a written lease. 

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About RD House Real Estate and Property Management:  We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.

 If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.

RD House Real Estate and Property Management

Leaders in Property Management

159 Denny Way #110

Seattle, WA 98109

(206) 728-6063

www.rd-house.com