Rental property questions

[canyonrider]

If this is in City of Boulder you’ll need to obtain a rental license.

Also, compare the market value of the property now vs. expected rent. Google the 1% rule. It’s not ironclad, but a good starting point for evaluating whether to rent or just sell. If you for sure plan to move back in at some point in the near future then it may not apply.

[Buster Highmen]

On selecting renters: you cannot discriminate. You can, however setup a significant set of requirements on when and how you will take applications. Here are some examples that may or may not work in your locality

1. Hold a home viewing day and only accept applications that day. No exceptions, if they didn't show up prepared, they lose. Make people sign in to verify they were there
2. First + Last + Security deposit (maximum amount practical, up to another month's rent or more if the market will bear it) due at lease signing. No exceptions. Yes, this is a significant amount of cash up front, in your case nearly $10k.
3. Sealed credit report due with application provided at their expense. No significant delinquency beyond 30 days. Must be in good standing with local institutions. No application will be considered without a credit report. No exceptions.

The should weed out 95% of the bad renters that will ultimately trash the place. You will feel like an asshole doing this, but you are not discriminating, you are simply separating the folks that come prepared from those who are not. Typically the one's who are not come complete with a sob story, drama, and bad things seem to follow them. You don't want that.

To defend against the rest...

You cover water/sewer/garbage and landscaping and raise the cost of rent to cover it. Hire a landscaper that will report the house condition to you when they stop by weekly. Do not accept the renter maintaining landscaping or allow them to pay for water, there is no security deposit high enough to cover this if your entire yard dries up.

Also: criminal background check.

[riser4]

Nevermind rental advice, I want the back story.

[riser4]

And don't forget the popcorn ceilings.

[Dexter Rutecki]

Interesting. Years ago when I was renting (with friends from school) the income requirements for most places were so stringent (relative to our incomes at that point--none of us had high paying jobs right out of school) that we didn't even bother looking at a lot of buildings. Here you need 40x the monthly rent to qualify (so a $4k/month place, which would be a fairly affordable, small 2br in most buildings I think) requires $160k income. Or else they literally won't even talk to you--the idea of presenting a sob story and getting in, I think, would be a joke (rental market is a little softer here than it used to be, but given that it was ultra-competitive before I don't really think things have changed).

I also feel like it's all pretty standardized here (I recall the forms always being the same building to building with identical requirements), so I wonder if you could just do something like that (copy the forms used by the rental agencies/brokers and that takes care of whatever you're going to require).

Landlords feeling bad about imposing onerous requirements? Ha ha...just don't think that's ever happened in NYC.

BTW, there's a long time maggot based in UT (who years ago did something with Denver real estate as well) who could probably answer every possible question you would have about this stuff (long time landlord for a few dozen properties)--don't want to publicly offer his help since I have no idea if he has time/inclination, but PM me if you don't know who I'm talking about (I'm guessing you do).

[LesterSmoove]

it might also be worth requiring them to have renters insurance? that's not too onerous. it's cheap or free bundled with auto policies. but I'd wonder about the person who doesn't want to spend an extra $100/year to cover their ass. if there is an incident causing damage, it might make your situation with landlord/homeowners insurance less painful, but frankly I don't really know what rental insurance does except protect my toys from bandits and fire.

[AdironRider]

The 3% was the overall value of the house, but in high value areas like yours you will probably not be that much. This does end up covering the big years (new roof/hvac) and the small years (paint).

I do tend to prefer credit scores, income requirements often get dicey/unrealistic.

Decent score means they pay their bills, and typically people who pay their bills on time are financially sound. Responsibility tends to be an overarching moral thing people either have or don't have, and if they are responsible enough to pay their bills, they typically are responsible enough to take good care of the place. There are exceptions of course but credits scores minimize them. My gut is pretty accurate for the most part, but I don't trust it exclusively when it comes to a couple hundred grand investment.

I don't do pets though. Your house will smell like cat piss or the trim/floors get fucked with dogs.

[XXX-er]

IME in 15 yars of running basement suites they are easy & cheaper cuz you don't pay extra for insurance/taxes/utilities/heat/ all the costs of another standalone property and you are right there to keep an eye on things, I actulay never had to go down there for 4 years

At the time buying a house avec suite made the difference between having to get a job to buy a house and staying retired

[Buster Highmen]

Also on renters, avoid those on some kind of church or even DHS support, being careful to not break laws in this regard.

Some states restrict rental prejudice against DHS clients, but usually, those institutions require higher housing standards than the local regulations. For example, DHS requires grounded, 3 prong outlets everywhere, but that's above requirements for home sales.

We tried it several times and on every occasion, it blew up and became a nightmare. So we haven't upgraded the outlets in order to leverage that against taking any more DHS cases.

[bendtheski]

Good intel here. Wife and I purchased the adjacent lot in Georgetown with the intent of building a rental property. Local dude who spec'ed our house recommended building something "not as nice" as ours, and looking for long-term over short. Guy across the street died a few years back, and that place was turned into a short-term rental. Nice cars and apparently well to do renters non-stop, and I haven't had a complaint with a single one. It's on airbnb for $125/nite.

We own the lot outright, and have decent equity in our current home, so not too worried about a construction loan, but we're early in the process and still haven't decided what kind of audience we want to try and attract; monied vacationers, or long-term year-round. Whatever we do, we're hoping to have some supplemental income in the short term, and retirement income in 10-12 years, or just sell it outright at that point.

I'm a dispatcher for the Sheriff's Office, and have heard a fair number of nightmare tenant/landlord stories over the years. Most common thread; no lease/no deposit. Who the fuck does this? In most cases there's something shady about those deals that prevents one or both parties from entering a formal agreement/contract. If we do go the long-term route, I will definitely be requiring 1st/last month +security, background and credit check. Anyone worth renting to should understand.

Short-term maybe more lucrative, but then there's short turn-around cleaning to deal with, and the possibility of no rentals some of the time. Upside is, we can block out as needed and use as a guest house. Thinking if we want to attract more upscale audience we might add some amenities like hot tub or sauna, grill, fire pit. Could even run it like a bed and breakfast, but probably a lot more work for minimal return, also more shit for tenants to fuck up. Upside is, we're right next door, and have a good relationship with local police.

I'd be interested to see what the landlords here think about short-term vs long, and just how nice a place to build? Also thinking this might be a good opportunity to upgrade some of the appliances and furniture in our home, as long as they don't cheapen the new build.

[liv2ski]

I have done a few home loans for people doing the Air B&B thing and they like it. Upside is the unit is not getting used 24/7 and as it is cleaned after each visit, stays in good shape. Downside depends on the location. The lady I know in Mammoth states her places are rented 75% of the time, she self manages 3 condos, but has a good cleaning crew and handyman at her beck and call. She makes it sound like it pencils out more income to her than just renting the place out to a long term tenant. I know another guy that has a place in just a normal neighborhood in San Diego. Again, he makes it sound like he receives as much rental income with it rented out 50% of the time as he would if he just did a long term tenant in it.
I know in my hood for the 3 months of summer I could get $10k per month easy and then likely $5k per month another 3-4 months out of the year, so call it $45k a year with us being able to use it half the year. As a long term rental we would get about $54k a year. For the difference in income we are looking at going the Air B&B route once my wife retires in June of 2020.
You just have to do the numbers and see what you think.

[I've seen black diamonds!]

Danno, my friend and neighbor has been renting his former residence is Louisville for a few years. He manages it all himself, and I think it's been working out quite well. I'm sure he'd talk to you about the process if you'd like. He's also a good dude.

[XXX-er]

o.. Whatever we do, we're hoping to have some supplemental income in the short term, and retirement income in 10-12 years, or just sell it outright at that point.


Short-term maybe more lucrative, but then there's short turn-around cleaning to deal with, and the possibility of no rentals some of the time. .

I'd be interested to see what the landlords here think about short-term vs long, and just how nice a place to build? Also thinking this might be a good opportunity to upgrade some of the appliances and furniture in our home, as long as they don't cheapen the new build.

I have a buddy with a good 1 bedroom/bathroom setup in her house that wouldn't work well for long term rental but its perfect for an Air BnB, from what I seen you might make mo money on short term rentals but staging and cleaning ties you to the AirBnB, staging could cost you money if you aren't there, some people make good money from running a bunch of them but also consider in places where Air BnB are altering the local scene ( Vancover ferinstance ) the Air BnB hosts are being hassled

In comparison I never went down stairs in the suite for 4 years, a couple of times I was out of country for a month and a long term rental just keeps making $$$ so that was zero maintenance, now days i get paid in cash or bank E-transfer so sometimes I don't even need to answer the door or count the cash

15 yars of suites has made for a lot of easy cash, IME a good setup makes for good neighbors cuz you are more or less ( hopefully less ) living with these people you want good parking, seperate entrances, reasonable sound proofing,

I take the view that I am competing for the good tennants so I charge a little less and they stay for a long time ( 2 and 4 yrs ) which means no change over/ no painting/ no showing/ no fixing/ no advertising/ no time when the place isnt making money

[Danno]

Danno, my friend and neighbor has been renting his former residence is Louisville for a few years. He manages it all himself, and I think it's been working out quite well. I'm sure he'd talk to you about the process if you'd like. He's also a good dude.

Thanks. If we actually take the plunge I may hit you up. I know it can work, obviously some people do it, just trying to get some basics to evaluate what I can roughly expect.

[bendtheski]

I have done a few home loans for people doing the Air B&B thing and they like it. Upside is the unit is not getting used 24/7 and as it is cleaned after each visit, stays in good shape. Downside depends on the location. The lady I know in Mammoth states her places are rented 75% of the time, she self manages 3 condos, but has a good cleaning crew and handyman at her beck and call. She makes it sound like it pencils out more income to her than just renting the place out to a long term tenant. I know another guy that has a place in just a normal neighborhood in San Diego. Again, he makes it sound like he receives as much rental income with it rented out 50% of the time as he would if he just did a long term tenant in it.
I know in my hood for the 3 months of summer I could get $10k per month easy and then likely $5k per month another 3-4 months out of the year, so call it $45k a year with us being able to use it half the year. As a long term rental we would get about $54k a year. For the difference in income we are looking at going the Air B&B route once my wife retires in June of 2020.
You just have to do the numbers and see what you think.

Location-wise, I think we could attract a ton of short-term. We're 12 miles from Loveland Ski Area, 25-30 to Summit, great mountain views, biking/hiking nearby, streams and lakes for fishing, Lake Dillon 1/2 hr drive for boating, couple of decent restaurants and bars in town, dispensary around the corner. Thinking 3 bedroom, maybe a step-up from a starter home. I guess the only thing I'd do any different design-wise from short-term to long would be a larger common/dining area for the short-term, but really might not do anything different. The other idea would be to build a duplex, but do I really want to live next to double the people/vehicle traffic, and kind of feel like I'd be pigeon-holing myself on resale.

Anyway, sorry for the hijack Danno, but thanks everyone for the responses.

[XXX-er]

just look on Air BnB for whats available in your ^^ town

and what/whom you will be competing with for customers

[Danno]

Location-wise, I think we could attract a ton of short-term. We're 12 miles from Loveland Ski Area, 25-30 to Summit, great mountain views, biking/hiking nearby, streams and lakes for fishing, Lake Dillon 1/2 hr drive for boating, couple of decent restaurants and bars in town, dispensary around the corner. Thinking 3 bedroom, maybe a step-up from a starter home. I guess the only thing I'd do any different design-wise from short-term to long would be a larger common/dining area for the short-term, but really might not do anything different. The other idea would be to build a duplex, but do I really want to live next to double the people/vehicle traffic, and kind of feel like I'd be pigeon-holing myself on resale.

Anyway, sorry for the hijack Danno, but thanks everyone for the responses.

No worries on the hijack, I think this thread is perfect for it. My understanding of the short term market is that 2br places are the sweetspot. For long term rentals, it's probably 3br. 2 2BR places in a duplex could make bank!

[sb]

PM KQ

[Lexi-Bell]

8)

I think small-time residential landlording of single-family homes is a good way to get yourself super-fucked and add immeasurable levels of stress to your life.

My experience has been completely the opposite. I have been managing our first home as an investment rental for 12 years, a townhome for 10 years, and can't imagine a less stressful opportunity to make money AND have someone else pay the mortgage. If something in the house breaks you go fix it, if you don't have the skill set for the project you hire someone who does. I'll admit I was nervous initially, but now I very much enjoy it and am always looking to buy more properties. I've developed dozens of excellent relationships with my tenants by being honest and treating them fairly.

Much good information already listed above, one item I will emphasize is Tenant Selection. This is the single most important aspect if you will be managing the property yourself. I price my properties slightly below comparable ones, it helps attract more folks and minimize vacancies.

I really like DJ's idea of an open house day helping to minimize less desirable tenants. I run extensive background checks (there are a number of companies that provide this service online) and require the applicants to pay for it.

If you are faced with the decision between a vacancy and an under-qualified applicant pick the vacancy. Most problems arise from shitty tenants.

[iceman]

At one point my cousin owned 38 rental houses, he started from scratch and lived in the first few sequentially as he fixed them up until his wife got sick of moving all the time. He made a lot of money out of it but completely burned out on being a landlord eventually and sold them all. But 38 is one thing and one or two is something else entirely.

[bendtheski]

Had a quick conversation with the guy who built our home 11 years ago. Guy is local and seems to have a pretty good handle on the local market. He suggested just a single 2br/2bath given the lot size, and to avoid shared driveway and parking hassles. Looks like others in the area are getting between $100-200/night, all older renovated "cottages". Thinking I might be able to get more with a new construction and amenities, but don't want to price myself out of the market. At least if I have a rough figure, it's a starting point to see what we can/should realistically build.

Shredgnar makes a good point as to our potential audience. High rollers stay in Summit; we're definitely more likely to get the frugal families/couples, maybe regardless of short or long term. OTOH, the market is unsane right now in Georgetown, with considerably older, smaller homes than ours selling for more than our house appraised at just 2 years ago. Not sure if it's because our Summit and Jeffco are too spendy, or just low inventory, but suddenly Georgetown is on people's radar. Kind of wish we'd built immediately 2 years ago when we bought the lot and be on to our next property by now. Dump across the street is listed for something like $335, and should honestly be bulldozed.

Oh yeah, builder reminded me he already ran gas and electric to the lot, and the town just put water and sewer in for the apartments across the street two years ago. Win/win.

eta, builder built my and my buddy's house, but he's not my buddy, guy. Or is he?

[stapes]

AdironRider pretty much nailed it.

Danno- I’ve done similar for 1.5 years not too far from you. We’re considering selling after this year to avoid cap gains but may end up renting it out further. We need to figure out some things on our end. It’s been beneficial overall for us so far. Happy to chat about it. Was fairly simple and straightforward.

[liv2ski]

I'd totally do a duplex. I doubt big parties are renting out houses in Gtown. Probably mostly frugal couples and small groups. With a duplex you could rent both out. With a bigger place, you aren't going to get as much rentals unless you rent it for cheap, which defeats the point. Duplex would give you more options.

Yup. My client that owns the Mammoth properties states one & two bedroom places are the ticket for Air B&B. People want cheaper lodging. Building two 2 bedroom units would be my choice.

[XXX-er]

can you go 2 storey ?

I have 1000sq ft 2 bedroom up & 2 bedroom down, seems to work well

[bendtheski]

We can go 2 storey, maybe higher, but don’t want to fuck up the view too much. The wife now pointing out that duplex would likely mean 2x the vehicles, which could suck with the inadequate parking for the apts across the street.

Going to see what the builder suggests, but if nothing else, we’ll probably do two side by side suites.