Putting Our House Up For Rent - What Should We Know?

[Anonymous]

DH and I are deciding to re-fi our house in Columbia Heights and rent it out. It's a cozy 2bd/3.5bath townhouse - it would be perfect for roommates or a young family. We've heard horror stories about renters abusing TOPA laws and taking landlords getting screwed over so I want to gauge how painful the process is/is it worth it?

Have any of you gone the rental route? What do you wish you knew before you started the process?

[Anonymous]

I wish I knew that in spite of having a no-pets, no-vaping or smoking (cigs, weed &/or dope) AND having a property manager our renters would indeed smoke and vape in addition to having two small dogs tear up our floors, stain our carpet and make the house reek. They managed (ha!) to fool the property manager when he would do monthly checks.

[Anonymous]

You need a basic business license, RACD registration and rent control exemption, and to file annual personal property taxes each July. You might need a lead test--check the DOEE website.

You will probably need at least 2 months to get all the licensing done and find a tenant to move in.

Consult with a landlord-tenant lawyer and use the lease they suggest. Provide all required addenda. Make sure the lease waives the notice to quit in nonpayment cases. Include a clause requiring the tenant to get renter's insurance. You can't force them to do it but when something gets damaged you can remind them they agreed to it and it can get them to stop asking them to replace the thing that got messed up for reasons beyond your control.

Section 8 pays pretty well (up to $2872/month for a 2br without utilities) but figure it will take an extra month to get the tenant moved in because of all the paperwork.

It sucks to pay the tenant's utilities but it may be better than them not paying and you getting a lien put on your property by DC water or something.

Don't assume that realtors or property managers know the law.

Something will break at the most inconvenient time possible. Are you going on an international vacation? Leave some keys with a trusted friend because a pipe IS going to start leaking.

You will think rent is due the day the lease says. Your tenant will think it's due the last day before a late fee is charged (and may not pay it then anyway).

You might think everyone knows what is safe to put down the garbage disposal or the toilet and how to change light bulbs and smoke detector batteries but you would be wrong.

You should assume that if your tenant moves out, the place will be vacant for 2 months while you fix it up, re-list it, and find someone to move in.

AirBnB is not a great solution because of the new restrictions if you don't live there.

If you think you want to evict your tenant or keep part of the security deposit, first read the Landlord-Tenant Survival Guide on the OTA website and then hire a landlord-tenant lawyer. It actually isn't that hard to evict someone (especially if they don't show up at court) but if you screw anything up (like sending the notice to quit in English only, even if your tenant only speaks English) can get your case dismissed, or worse, get you sued.

If you are going to be living close by and you are reasonably handy, you should still probably sell unless you can clear about $500 a month after mortgage, any condo/HOA fees, property taxes (don't forget to tell OTA you no longer qualify for the homestead exemption), and insurance. I'd bump that up to $700-800 a month if you're going to use a property manager.

[Anonymous]

Good advice from pp.

We rent out the houses we owned individually before we got married.

Initially we used a realtor to find tenants - it was very helpful, and not cheap.

Now we do the listing/tenant screening ourselves and it's pretty easy - there online tools that help, like smartmove, trulia, militarybyowner.com, etc...

The single most important thing for us has been having a handyman we trust and who is comfortable being on call. Having someone your tenant can call when something breaks, who can go over and do basic repairs or assessments and let you know what's happening, will save your sanity.

Good luck!

[Anonymous]

Anonymous wrote:DH and I are deciding to re-fi our house in Columbia Heights and rent it out. It's a cozy 2bd/3.5bath townhouse - it would be perfect for roommates or a young family. We've heard horror stories about renters abusing TOPA laws and taking landlords getting screwed over so I want to gauge how painful the process is/is it worth it?

Have any of you gone the rental route? What do you wish you knew before you started the process?

you need to know that rates for rental properties are higher than those for primary residence. so if you plan to be truthful about it, expect your rate to be higher.

you'll also need to let your homeowners insurance carrier know so they can adjust the coverage. if you don't, and you have the need to use your insurance AND the carrier finds out it's not your primary residence, they will deny coverage for the claim.

[Anonymous]

We held on to a home and rented it out a home for a number of years. My advice:

1. Do not rent to "roommates", look for a family or working couple. Fewer problems.
2. Be prepared for surprises. The sink springs a leak, the doorknob is loose, etc. Renters rent because they do not want to do repairs. They want YOU to pay to fix it, ASAP. Contractors aren't cheap, and it comes out of the rent.
3. All renters are different. Some are easy going and some are...not. You repainted the walls in the color I wanted, but you missed a spot! Come fit it!
4. Use a middleman. Find a realtor who handles rental contracts, and is the contact for repairs, renter questions and collecting rent checks. You will never deal with the renter directly. It is so worth the cost.
5. Be prepared for uncertainty. If you are renting to create extra income, think again. See Tip #2. Anything can happen.
6. Insurance. You'll need to add renters insurance to your policy.
7. Landscaping. Your renter doesn't want to mow the lawn and pull up weeds, so who will? Don't piss off your neighbors by allowing your property to become the neighborhood eyesore.

I could go on, but you get the idea. Being a landlord isn't for the faint of heart.

[Anonymous]

^^ Another thing about middleman/rental agencies I forgot: they will run the background check on potential renters for you. Again, worth it!

[Anonymous]

DH and I did this with our "starter" home. The agent who helped us buy our bigger house was great and found us renters and put together a lease and basically got all the infrastructure in place for us (business license etc). Then for subsequent rentals we did it ourselves, and sold within the period to avoid capital gains. Here's what I learned:
- Agents earn their money finding you qualified renters. It is a lot of work.
- If you decide to find tenants on your own, set up a couple of open houses for people to come and see the place. If someone requests a time outside the open house, ask for a quick call before setting up a time so that you can answer any questions they have. I was so PISSED by the number of people who asked for special viewings and then haggled with me on the rent, length of lease, said they were still trying to find a roommate, etc.
- We had some really good tenants who were kind and respectful (and loved flushing tampons down the toilet)
- We had a tenant who acted like we were put on this earth to serve and everything was an emergency (none of it was)
- We ended up setting up a service agreement with a plumbing/ HVAC company so that anytime something came up, they'd do immediate service 24/7. It eventually paid for itself and ensured that any of the (minor) issues that came up were resolved immediately.

In DC you can collect a non refundable fee for pets (as I recall, it can't be a refundable deposit). Definitely do it.

[Anonymous]

To avoid personal liability you should transfer the property to an LLC. The problem then becomes how to refinance a property owned by an LLC. You will not be able to secure a residential mortgage but will instead have to go through the banks commercial loan department which will have higher rates, balloon payments and other less favorable terms.

I would personally not own rentals in DC due to the anti landlord stance of the city gov. I would sell and then invest the proceeds in a rental in MD or VA. Or buy stocks during the upcoming recession and then ride the wave back up.

[Anonymous]

As a rental property owner myself, I wouldn't do it. Lots of downsides, you won't actually make that much money and the tenants will trash your place eventually.

[Anonymous]

OP here - thanks for these insightful responses.

regarding tenants that trash your place - isn't that what the security deposit is for? Were damages that extensive that the deposit didn't cover the repairs?

[Anonymous]

14:55 has a lot of good advice.

Also— in DC it doesn’t matter if you don’t want to renew a lease— a renter has the right to live in your unit indefinitely as long as they pay their rent and comply with the lease (unless you want to move back in and give sufficent advance notice).

The IRS will collect 25% depreciation recapture tax whenever you sell your place (if you took depreciation deductions or not) so make sure you know current fair market value and are taking depreciation deductions.

[Anonymous]

Anonymous wrote:To avoid personal liability you should transfer the property to an LLC. The problem then becomes how to refinance a property owned by an LLC. You will not be able to secure a residential mortgage but will instead have to go through the banks commercial loan department which will have higher rates, balloon payments and other less favorable terms.

I would personally not own rentals in DC due to the anti landlord stance of the city gov. I would sell and then invest the proceeds in a rental in MD or VA. Or buy stocks during the upcoming recession and then ride the wave back up.

Terrible advice in DC since this removes your ability to have a rent control exemption.

[Anonymous]

Anonymous wrote:OP here - thanks for these insightful responses.

regarding tenants that trash your place - isn't that what the security deposit is for? Were damages that extensive that the deposit didn't cover the repairs?

You can get a maximum of one month's rent as a security deposit in DC. That really doesn't go too far for repairs.

You cannot deduct for "normal wear and tear," so you'll probably have to pay for repainting, new carpet, a deep cleaning, etc. out of your own pocket.

Plus if you try to withhold, it's pretty cheap for the tenant to sue you in small claims court and they have nothing to lose by trying.

[Anonymous]

You have no idea how much damage renters do. If you plan on ever living in the house again; reconsider. Also, your neighbors are likely to hate you if you pick bad renters.