Rookie Landlord Lessons

Jun 26, 2014 by

farmhouse for rentThose of you who visit regularly may recall that two brothers and I inherited a farmhouse in central Illinois when our mother passed away in January. The house had no tenant, and after devoting quite a lot of resources to ongoing work to assure (I hope) the house is in good shape, we signed a lease with a tenant a couple of weeks ago. Yahoo!

I took the lead on all the steps culminating in a signed lease, including advertising the property, phone interviewing tenant prospects, arranging for tours of the house, signing up with a background check service, putting together a Lease Agreement and Pet Agreement, and lots of communication with all parties involved.

Advertising the Property

I really didn’t have a good idea how best to advertise the house for rent. I checked out local newspapers, but classifieds are quite expensive in my view and who reads the newspaper anymore? I settled on a Craigslist ad to start because I’m cheap and Craigslist is free. Here’s the text of our simple ad:

Two story, 1600 sq ft, 3-bedroom, one bath, mostly furnished heritage farmhouse on 2 acres. 21 miles southeast of Champaign and 6 miles from Homer. Available August 1st. $800 per month, tenant pays all utilities. Background check required.

I included fifteen photos, kindly taken by the wife of the gentleman who farms our land and looks after the house too. This couple did us another kindness by asking around about local rents for similar properties. That’s how we settled on $800 + utilities.

 

Inquiries Pour In

I didn’t know what to expect, but we got far more inquiries, right away, than even my most optimistic thoughts. I created a form with questions I wanted to ask during phone interviews and began calling inquirers. Many were very excited about the property. (Our mother would have been pleased!) Apparently “country homes” are sort of trendy these days, even or maybe especially 150-year old country homes. We began to have landlord’s remorse that we’d set the rent too low! But I think not given the tenant pays all the utilities.

One inquirer suggested she’d live there with her boyfriend and another couple, also girlfriend-boyfriend, and assorted pets. Thanks, but no thanks. I’m not interested in landlording over a mini-commune.

I ignored a few inquiries that comprised something like this:

Interested. 217-XXX-XXXX

sent from my iPhone

I acknowledge that this exemplifies how many operate these days, but I’d have to get more than desperate before I’d spend time following up on an inquiry like this. This is probably how these people respond to employment advertisements too. 🙂 Sorry, and it’s nice to know you have an iPhone, but if you can’t be bothered to write a sentence or two about yourself, you won’t be living in my house. I hope this attitude doesn’t violate some regulation about criteria landlords may and may not use to select tenants. “Discourteous, clueless dorks have the right to rent too!”

I came to learn that many of the inquirers were “rental-challenged”: Pets, average or worse credit, a history of bad landlord relations, no visible means of support, etc. But some inquirers were good, though of course not perfect (who could be?).

House Tours

After doing a dozen or more phone interviews, I sent contact information for four parties to the gentleman who looks after the house for us. When he called one, she’d already signed a lease for another place. A message attached to a second’s phone number indicated the line had been disconnected (strike one, you’re out!). The other two parties visited the house and both loved it and wanted to sign a lease.

We Choose a Candidate

After considerable discussion among the owners and based in part on criteria on which I’ll decline to elaborate here, we chose a couple with two dogs, also with rural roots, to move forward with.

The future tenant was thrilled, but then I got a surprise: They didn’t want to sign a lease without meeting us in person! Wow, that was totally unexpected, but I respected them for it. Why shouldn’t they be suspicious of us too? Unfortunately, meeting in person anytime soon would be impossible, and I told them I could not stop advertising the house and entertaining other prospects until we had a signed lease. I sent this couple some information on my brothers and I such as brief biographies and LinkedIn pages. After a day or so they said they were okay signing a lease, but still wanted to meet us before handing over any money.

Luckily we’ll all be in the area of the farmhouse in July for interment of our mother’s cremated remains, and we’ll be able to meet our future tenants then.

I know ‘country people’ are renowned for doing even big business based on only a handshake. But I didn’t realize that apparently at least some are reluctant to do business, despite all the paperwork in the world, absent that handshake. I think that’s pretty cool!

Background Checks

I’d told all the prospects that before we’d get to the lease signing stage, we’d need their permission and information to do a background check. I signed up with e-renter.com, a background check service. On the suggestion of a landlord friend, we worked the cost like this: The applicant would pay the $30 each for background checks. If they passed the check and signed a lease, we’d reimburse the cost. If not, they’d be out-of-pocket the $30. No one balked at that (and I’d have disqualified anyone who did).

The e-renter.com service for which I signed up does a general background check, a criminal record check, and a credit check. The credit score of one-half of the couple who were our top prospects was less than I would have liked. But after a chat about the reasons—which I concluded were mainly a lack of credit history—I decided credit was not a reason to turn them down.

The Lease

Now we needed a lease. I found online a model Illinois Residential Lease Agreement and a Pet Agreement. I’m not an attorney, but I made some modifications to customize the Agreement to our liking (hope I didn’t screw up here!), and we got it signed. Yippee! I was glad that was over!

The Future

Naturally it’s impossible to predict whether any tenant will work out. I feel confident that the couple we chose are upstanding people who will be conscientious about the property.

One important lesson I learned:

We had no idea how many inquiries to expect. I was sort of anticipating, or maybe fearing, a trickle, plus I was excited that we were even getting inquiries, so I processed them serially. Given what appears to be the popularity of our house, next time I think I’d leave the ad up until we got say a dozen inquiries. Then I’d take the ad down and phone interview all of these inquirers. Along with my brothers, I’d lay the dozen profiles out and consider them side-by-side. We’d choose the top two prospects for house tours, and if both wanted to rent the place, choose a #1 from among these two for background checks. If things don’t work out with #1, go back to #2, and repeat as needed with the remaining inquirers, and re-post the ad if needed.

Do You Have Landlord Experience?

I know many of you are landlords. How do you think we did as rookies, and any tips for the future?

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  • Thanks for sharing your experience.I hope to be a landlord some day and am always on the lookout for rental properties.

  • Wow, it’s neat to be able to read your experience like this. I hope it works out for you, and I’m sure it will. Your new landlords sound responsible since they were reluctant to sign a lease without meeting you. I can see why – where you live is a big part of your life and you want to know who you are up against as your landlord 🙂 GOOD LUCK!

  • This actually sounded more like an article for renters that need to know how to respond to an ad… I’m a landlord and every time I’ve had to find a new tenant I come across the same issues. My situation is different though, I don’t rent out an entire house, but just rooms in my house (it’s San Francisco… it’s hard to afford to live by yourself) So I actually live with my tenants.
    Everything you did sounded good to me though, I also found my original lease online and have adjusted it as needed. I added clauses about “permanent guests” where I had to define what they were (I’m try to get one roommate, not a roommate plus their significant other), and I’ve also added things to clear up future issues with pets and such.
    Unfortunately the more “issues” you have the better you get about what to add into your lease for the next time. Good luck with your new renters.

    • Yes, I’m sure we’ll be learning some lessons ‘the hard way’ as we progress. Thanks for the good wishes.

  • Nice article. Sounds like the first time I put my rental home on CraigsList. lol. You did good with using the website for background checks. It seems like you may have some good tenants there. Once you get good tenants, keep them happy!

  • I’m not a landlord but according to a couple of landlord blogs I’ve read so far, you’ve down a pretty good job! Some people say you should weigh in credit score more, since it could be an indication that they won’t pay the rent in time, but it could also be possible it’s because they only lack credit history just like you said. Was thinking that the rent was pretty low, especially since it’s a whole house, but I don’t know the average price in that area, so I can’t say much. Just wondering, did you ask for deposit as well?

    • Considering the good response we got to the ad, we are thinking the rent may be low too. But we don’t really know the utility costs (which the tenant pays), so tough to judge right now.

      We got a security deposit plus an additional deposit for each pet, which we’re allowing up to a limit.

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