rental Atlanta Real Estate SaleMost of us don’t have the time, abilities, and energy to manage rental process yourself – even if you think you may save a good deal of money by doing so you are probably wrong.

If you try to manage without the ability – it could end up costing you much more than what Shawn Penoyer might charge if he were  your agent!

Here are few questions regarding to the Rental Process that our clients often ask us.

 

How Much Can You Rent your House For?

In a theoretical sense, the value of anything is not based on what the seller wants – but what the market is willing to pay. In the world of rentals – this means that you do not necessarily set the rental amount – the market does. Our job is to discover what the market will allow for your house and attempt to get that amount, known as “Fair Market Rent.”

Your house will generally rent for about the same amount as other properties are renting for that are of similar location, size, and condition. To determine this we will do market research.

How Much Should You Charge for a Security Deposit?

A security deposit is a sum of money paid by a tenant to ensure they fulfill the terms of their lease. Remember though – this is a deposit, not a fee. This money should be held in separate bank account and returned to the tenant when the tenant moves out, less any damages that need to be repaired.

The amount you charge is largely up to you, though many states restrict the amount you can charge, so make sure to check to find any local limitations. I typically charge the equivalent of one-month’s rent for a security deposit, though I may charge more than that if the tenant has anything in their background that worries me (which we’ll get to in a short while.)

How to Rent Your House to the Best Tenants

The most important decision you make that will determining the success or failure of your rental is the person you put in. A bad tenant can potentially cause years of stress, headache, and financial loss – while a great tenant can provide years of security, peace, and tranquility. Don’t underestimate the important of renting to only the best tenants. You are reading this guide because you want to learn how to rent your house. Finding the best tenants is how to make that rental enjoyable, and Shawn Penoyer will help you with that.

Advertising for Tenants

When it comes to attracting tenants to rent your house, we will want to reach the most potential tenants as possible so you have the largest pool to choose from. We not only advertise your house for rent online on craigslist.org, zillow.com etc. and it is much more than online advertising, newspaper or the oldest method – yard signs. Shawn Penoyer is an agent that knows how to advertise your property for rent.

Pre-Screening The Tenants

When I receive a phone call from a prospective tenant, I always pre-screen ahead of time. This means to try and qualify the tenant over the phone before spending time going over to the house to show them. The easiest way to do this is by setting rental criteria and explaining that criteria over the phone. Most of the time criteria looks like this:

otherThe gross monthly income must equal approximately three times or more the monthly rent

 

otherApplicants must have a favorable credit history.

 

otherApplicants must be employed and be able to furnish acceptable proof of the required income.

 

otherApplicants musth have good references concerning rental payment, housekeeping, and property maintenance from all previous Landlords.

 

otherWe limit the number of occupants to two per bedroom (per State law)

 

Showing the Property to the Tenants

Showing units can be a pain because 50% of the time, tenants will not show up, but we will handle this for you. To combat this, I use one of two techniques: The Application Process We always give an application to every single person who is interested, even if you are not interested in them (this is another measure to ensure you will not be charged with discrimination.) Encourage them to fill it out there, but you will probably find that the applicant will usually want to fill it out later and drop it off or mail it to you. Shawn will try to discourage this, as it adds a lot of time, but sometimes the tenant will want to think about it, so have a plan in place to deal with this.

The Rental Application

An ideal rental application should have space for the tenant to fill in the following items for all adult applicants, at minimum:

otherNames of all potential renters

 

otherDate of Birth

 

otherSocial Security Number

 

otherPhone Number and Cell Phone

 

otherAlternate Phone Number

 

otherPrevious Addresses (last 5 years)

 

otherCurrent Employer (name, hire date, income, contact info)

 

otherPast Employer (name, hire date, income, contact info)

 

otherEmergency Contact Information

 

otherRelease of Information Statement

 

otherSignature for All Tenants

 

The Application Fee

It is recommended to always take an application fee with the application. This amount can be whatever you’d like (and whatever the market will bear) but we will determine this sum for you.

The application fee covers the cost of the background check, but it doesn’t have to be equal to that amount (you can get paid for the hassel of needing to check their background.)

When we receive back an application from a tenant with the application fee, we carefully look over the document and look for the important things before bothering with a background check. The obvious things are those you read to the tenant over the phone, which included:

The gross monthly income must equal approximately three times or more the monthly rent

otherApplicants must be employed

 

otherApplicants musth have good references concerning rental payment, housekeeping, and property maintenance from all previous Landlords.

 

otherThe number of occupants is to two per bedroom or less

If you can quickly see that the rent for the house is $1000 per month and they only make $1800 per month in gross income, they clearly did not pass the income qualification. Sometimes this is due to a writing error or income they forgot to include, so be sure to clarify with them before rejecting the application. Chances are, however, that the tenant simply doesn’t qualify and was hoping you wouldn’t notice. If you did a thorough job of explaining the criteria over the phone with the applicant and they still applied and didn’t qualify – it’s up to you if you want to return the application fee. However – don’t bother running the background/credit check if they are disqualified due to one of the above criteria. We’ll cover more on how to disqualify someone in just a moment.

Background and Credit Checks

If the tenant’s income is high enough and we feel confident moving forward, it’s time to dig deeper. There are many different sources you can use to run a background or credit check on a tenant, but we have our methods.

Verifying Income and Rental History

People often lie, especially when they want to get into a new rental and cannot qualify. As such, it is vitally important that we will verify everything that the tenant writes on their application. As discussed earlier, your application should include a “release of information” signature from your prospective tenant to allow you to properly check up on their claims.

Begin with their job. The application should include the name and phone number of their current employer, so call and speak with the manager, owner, or human resource manager. Many times you will be required to fax over the release of information signature. The important questions to ask are:

otherHow much do they currently make?

 

otherHow long have they worked there?

 

otherIs this job considered temporary?

Next, we don’t call their previous landlords. Many landlords will lie or embellish the truth in an effort to get rid of bad tenants. Instead, call all the previous landlords for at least the previous five years. We check their background check and credit check to see if any other addresses appear that might indicate they conveniently “forgot” to include a landlord that they rented from.

Accepting or Denying an Applicant

After receiving their background check and verifying the information listed on their application is correct, we will give you a good idea of whether or not the tenant is worthy of your rental property.

When you deny an applicant, it is important that we will clearly document our reasons for why you are denying them to avoid discrimination complaints. We always inform the tenant with written notice. I always send a letter to the tenant stating that they did not meet the minimum requirements for tenancy for “such and such” reason. Be sure to keep a copy of all records pertaining to the prospective tenant so you can back up your reasons for denying a tenant.

When you find an applicant that meets all your requirements, you can verbally let them know that they are approved. However – our job is not yet finished. Many times a good applicant will be approved but still find another place to rent, leaving you wondering what happened to that applicant. Therefore, it is important to require a deposit to hold the vacant property. This deposit is non-refundable and should be due within 24 hours of being accepted. Simply let the approved applicant know that we cannot hold the property indefinitely so if they want to guarantee their position they will need to pay the deposit within 24 hours.(Some landlords actually require that the deposit-to-hold be paid when the application is filled out and the landlord simply returns the deposit if the tenant doesn’t qualify. While I don’t personally use this technique, it may work for your location if there are a lot of qualified applicants trying to rent your house.)

This deposit will turn into their security deposit (which we will get to later) so it’s not an unexpected cost for the applicant. When you collect this deposit, be sure to sign two copies of a “deposit to hold agreement” that states what the deposit it for and what the terms are. Essentially, this document will state: The applicant has until “such and such” date to sign a lease agreement. If not signed by that date, the deposit will be forfeited to the landlord.
Both you and the prospective will receive a copy of this agreement, which will serve as a receipt for the applicant. I try to schedule the lease signing for as soon as possible, to minimize the amount of time the property is left vacant and costing me money. Typically, I will not hold it longer than two weeks unless I absolutely love the tenant and don’t want to lose them. This is up to you and your discretion.

The Rental Lease Agreement

In order to sign a rental lease with your tenants, we will need to have – of course – a rental lease.

“Having a strong, loophole-free lease agreement is probably the most important aspect of maintaining good, long-term tenants who treat your property the way it deserves to the be treated (or pay the price if they don’t).” – J Scott

While lease agreements generally vary in length and content, each lease agreements must contain the following information like names of tenants, address of the rental property, lease term Length, rent amount, security deposit amount, late fee description, the move-in condition report, provisions for or against pets, utilities, smoking, and more.

You may also need to provide certain State and Federal documents with your lease, depending on when your home was built and your State laws.

How to Sign a Lease Agreement

We will schedule a time for the tenant to meet with you at the property. We don’t sign at a coffee shop or via the mail/fax, but actually meet at the property on the day they will be moving in. Shawn find it helpful to go through the lease ahead of time and mark all the signature or initial areas with post-it notes or a highlighter so nothing will be forgotten or missed.

Accepting the Rent

During the lease signing, when you get to the part that says how much the monthly rent is – this is a good time to get the money for the first month’s rent. You should have already received their security deposit (in the form of a “deposit to hold” when they were approved) so typically this is when you will collect their first month’s rent.
If a tenant moves in during the middle of the month, we don’t pro-rate the amount they pay upon first moving in. Instead, we pro-rate the second month to match the first. In other words – every tenant pays a full month’s rent when they move in, but when it comes time to pay the rent on the 1st of the next month, they will only pay for the amount of days they lived at the home in the previous month. For example – if the rent is $1200 per month, and they move in on the 10th of January, they will pay a full $1200 for rent when they move in, but will only pay $800 on February 1st.
One final note on the rent: Only accept rent in certified funds, such as a money order or a cashiers check. Don’t take cash and don’t accept a personal check – especially for the first month’s rent. You do not want to move a tenant in and find out weeks later that the check was bad, forcing you to evict. This is a wise policy to have all around in your relationship with your tenants: certified funds only.

For paying rent in the future, I recommend not picking up the rent in person, as this will only train the tenant to expect you each month. For my rentals, I mail monthly statements to the tenant and they mail their certified funds to my PO Box. Ultimately, you may change or adapt your style as you learn more and grow.

The Move-in Condition Report

By this time, the rent and security deposit has been paid and lease has been signed. It’s now important to do one final thing before handing over the keys: the move-in condition report. The move-in condition report is simply a paper that the tenant will sign that documents, in detail, the condition of the property. Allow the tenant to take some time walking through the property and inspecting it – letting them take notes of the condition of each room. If there is a hole in a door – document it. If there is a light switch that doesn’t work – document it. If there is a stain on the carpet – document it.

The move-in condition report is designed to protect both your interests and the interests of the tenant when it comes time for the tenant to move out. As much as you might think you’ll remember every detail of the home – you won’t. By documenting everything and having the tenant sign-off on that documentation, the tenant can not come back to you next year and say “oh – the giant hole in that wall was already there.”
For the same reason, we also recommend taking photos (or a video) of the property before handing over the keys. This will be further evidence in the future when the tenant moves out. In many States, a landlord can not deduct any charges from the security deposit if a move-in condition report was not filled out when the tenant moved in. Do not make this mistake – document, document, document. Some landlords will even photograph and/or video record the walk through itself to document the tenant noting the condition of the property.

Handing over the Key

When the tenant has filled out the entire lease agreement, both parties have signed it, the move-in condition report has been signed, and the rent has been paid – you can now hand over the keys to the tenant to allow them possession. Although the tenant may ask – never let a tenant move in things before signing the lease and paying the rent. The consequences for failing to do this could be disastrous.

Shawn will make sure that you have made it clear to the tenant the rules you expect, as well as the procedure for paying rent, requesting maintenance repairs, and other details about your house. By training your tenants, you set the ground rules ahead of time and ensure they are aware that you’re not the kind of landlord that they can walk all over.

Call or email Shawn Penoyer if you would like help with your Rental decisions!

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