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Renting out your home requires that you keep up with the home maintenance. If your home is in good condition, then you should be able to build up enough income from renting the property to cover most repairs. However, if the home is not in good condition, initially, you may have to complete a significant number of repairs.
If your home requires a significant number of repairs, if you sell the home, you will probably not be able to get the maximum amount of equity out of the home. Some homeowners use home equity loans to make the necessary repairs to place the house for rent and/or sell.
If you already have someone interested in purchasing your property, you may want to proceed with selling your home. An agent can assist you with this process.
Often homeowners will need to reduce their outstanding debt by clearing a line of credit indicated in their credit history. Oddly enough, having a current home mortgage can be the very thing preventing a homeowner from purchasing another house. In this case, the homeowner will definitely need to sell their current house and renting is not an option.
Also, homeowners may need to use the equity from their current home in order to purchase another home. This is often the case when a mortgage lender is requiring the buyer to provide a down payment for the new mortgage.
Some homeowner associations don’t allow homeowners to rent their houses.
Some homeowners need all the equity from their homes at one given time without borrowing additional funds. Selling the home frees the homeowner from the loan and provides maximum liquidity so that he / she can use the equity towards whatever purpose required.
If within the local real estate market there are numerous buyers willing to pay at or above fair market value for properties, it may be wise for the homeowner to sell his / her house and take advantage of the high demand within the local market.
If you haven’t owned your home for a long enough period of time to build equity, you may want to rent out your home in order to gain more equity and then sell the house at a later date.
Some homeowners find themselves in a position where they can’t sell the house for whatever reason but yet still need to pay the home loan. Common instances where this may occur include:
Home has multiple owners who cannot agree on how to dispose of the home;
Divorce, separation or probate concerns;
Temporary downturn in home prices in the local market; and/or
Homes remaining on the local market for an extended period of time beyond which the homeowner cannot wait for the sell to occur. In this case, the homeowner may wish to rent the house while waiting for it to sell.
Some homeowners wish to build or maintain their credit by keeping two excellent lines of credit – one for their current home and one for their rented home.
Depending on current tax law or anticipated changes in tax law, homeowners may find it advantageous to sell their homes as opposed to renting them out.
Renting a property can provide a fairly stable income stream depending on several factors:
The underlying monthly mortgage payment.
The cost of repairs and maintenance.
The vacancy rate; that is, how consistently is the house occupied by a tenant.
The value of any tax deductions that a homeowner gains by renting a property.
If for any reason the homeowner plans to move back to their current home or area and are satisfied that they won’t need or want a larger or smaller home upon return, the homeowner may want to rent the property in their absence. Many military families find this to be a good option since they often deploy or are reassigned temporarily.
If there is a high demand for rental properties in your area, it may be a good idea to rent out your home. High demand can offer two advantages:
You can charge a higher rent; and/or
You can experience a lower vacancy rate.
A property manager provides a homeowner with a number of services which assist a homeowner in renting out his / her property. Some common reasons to use a property manager include:
Protect the owner’s investment
To assure rental operates within the Texas property code
Buffer between the owner and tenant to reduce liability
Representative for absentee owners
Protect owner privacy
Help reduce vacancy
Assure owner receives fair market value for rent
Inspect the property for damages
There are several questions that a homeowner should answer when selecting a property manager. Determine if the property manager you’re considering satisfactorily meets most or all of these concerns:
Do they have a physical location?
Are their fees competitive for the local market?
Are there hidden fees?
Does the property manager use independent, licensed and bonded (where necessary) repairmen? Does the property manager use its own in-house repair personnel?
Can you contact the repair man directly?
Are they an established company?
Do they market their properties?
What’s their better business bureau rating?
Can they sell your property if you choose to sell?
The contract establishes the terms of agreement between the homeowner (landlord) and the property manager. All rights and responsibilities of both parties are listed in the contract. Therefore, it is very important to read and understand your property management contract.
The contract also sets the owner’s expectations and assures the owner operates within the Texas property code. If you’ve never rented out your property, the contract is the first place to look when figuring out what to expect. Additionally, the property manager has a responsibility to assure that the contract aligns with state and federal law.
If you choose to change property managers, it's important to understand how to do this without incurring any liability. For example:
Soldiers of Real Estate enters into a lease agreement with the tenant. The tenant is obligated to Soldiers of Real Estate for the entire lease period. Soldiers of Real Estate automatically makes provisions for a tenant to renew his / her lease. The property management fee is associated with the underlying tenant lease. Therefore, the landlord must pay the management fee for entire time period that the tenant is under a Soldiers of Real Estate Lease Agreement, even if the landlord chooses to switch to another property management company.
According to the property management contract, a landlord must notify Soldiers of Real Estate in advance before switching to a different property manager.
Because of the two requirements above, landlords often must notify Soldiers of Real Estate well in advance of the tenant’s lease expiring that the landlord does not want Soldiers of Real Estate to renew the tenant’s lease because the landlord wants to switch to another property management company. Otherwise, the landlord will remain obligated to Soldiers of Real Estate for another lease term.
Landlords should go through their property manager when it comes to dealing with the tenant. There are certain provisions, protections and obligations in place for the protection of the tenant and landlord, and it is the responsibility of the property manager to act in the best interest of the landlord without violating the rights of the tenant.
Please note that any agreement the landlord makes with the tenant could:
Conflict with the tenant’s lease agreement;
Put the homeowner at a disadvantage; and
Would not absolve the landlord or tenant of any obligation he / she has to the property manager.
A property manager is responsible for knowing and understand the law as it pertains to tenant’s rights. A few major provisions include:
Texas law governs the landlord’s rights and responsibilities when it comes to changing locks and preventing or allowing a tenant access to the property.
Texas and federal law governs the responsibilities of the tenant when it comes to paying for damages and any collections activity that can result from a tenant’s refusal to pay.
Texas law specifies the steps, notifications and time constraints when it comes to properly evicting a tenant. If a landlord violates this law, he / she could be fined or sued.
Landlords will need to change the type of home insurance they have when renting their homes. Typical home insurance does not cover properties which are leased to tenants. For example, there is no (or limited) coverage for the contents of the property such as the tenant’s furniture, etc.
If the property is not mortgaged with an escrow account, the landlord will need to contact the county property tax appraisal district to update their mailing address. A mortgage company uses the escrow account to pay the property taxes. However, if the property does not currently have a mortgage, the landlord is responsible for paying the property taxes.
When renting a home, Texas law requires that all external doors must have a keyless deadbolt lock.
Peepholes are required on all external doors. Alternatively, the door must have a window close by which would allow a tenant to look out and see a person at the door.
Usually multi-unit properties require additional things such as:
Exit signs; and
Landlords are required to repair all unsafe conditions. Examples of unsafe conditions include:
Trip hazards such as the carpet being not tacked down or uneven concrete;
Electrical hazards such as loose wires or ungrounded wiring; and
Sharp or puncture hazards such as broken windows or torn metal flashing in doorways.
The initial property cleaning is the responsibility of the landlord. The tenant is responsible for cleaning the property thereafter.
The initial property pest control and the pest control for the first 30 days of each new tenant lease agreement is the responsibility of the landlord.
New tenants are responsible for pest control after the first 30 calendar days.
If a current tenant renews his / her lease, this does not count as a new agreement, and the tenant remains responsible for pest control.
Soldiers of Real Estate sources tenants by actively marketing rental properties:
We list properties in various places in order to reach potential tenants:
Military homes website; and
Soldiers of Real Estate website.
We also use referral fee incentives so that our tenants will recommend us.
Finally, we use yard signs to advertise our property management services.
If the landlord sources the tenant, the tenant will nevertheless need to sign a lease with Soldiers of Real Estate.
Soldiers of Real Estate tenants follows a standard process when applying for a lease. See Tenant Application Process for more details.
Tenants that are not sourced by the landlord are required to pass a:
Rental history check
All tenants, regardless of whether Soldiers of Real Estate or the landlord sources them, are required to provide proof of income.
Soldiers of Real Estate generally pays all landlords by the 12th calendar day of the month. However, this is determined by the tenant’s on-time payment. Most often landlords are paid within 3 days of receiving the tenant’s payment.
Maintenance costs and the property management fee are deducted from the tenant’s payment. The difference is provided to the landlord.
There are various methods of payment to include, but not limited to:
Checks which are deposited directly into a local bank / credit union account
No fee bulk wire transfer to individual bank / credit union accounts
Fee based individual wire transfer to a bank / credit union account
Payment in person via check
Statements are sent via regular mail so the landlord may not receive it for up to 7 days depending on the speed and reliability of the postal service.
The statement indicates the transactions that have occurred for both the current month and year-to-date. Many landlords elect to use their December statement in order to complete their annual IRS tax return.
Any charges, such as maintenance charges, also will show up on your statement.
Any repair bills for property maintenance will be attached to your statement.
Any damage that falls under the home insurance is the responsibility of the owner.
Any damage that is the tenant’s fault is the responsibility of the tenant. Specifically:
Tenants are required to pay for damages with their next immediate rent payment.
However, if the tenant fails to meet his / her obligation, the landlord is still responsible for necessary repairs. For example, a broken window is a necessary repair to prevent further damage to the home.
Some damages require immediate repair so it's possible that the landlord may be charged for the repair prior to the tenant paying for the damage. An example of this is if a window is broken after the tenant has paid the rent but before the landlord’s payment has been sent.
Because landlords receive a copy of the maintenance bill with their statement, they are free to contact the maintenance company / independent contractor directly to resolve any issues. This also provides the landlord with proof of the services rendered should the repair not be completed correctly.
Landlords are generally notified in advance when a tenant plans to move out or will be evicted from a property.
Soldiers of Real Estate strives to assure continuous occupancy of the rental property. The tenant lease agreement requires advanced notification of move-outs in order to allow for inspections and preparation for move-out.
If the property is not occupied, landlords will not receive a rent payment, but in kind, Soldiers of Real Estate will not collect any additional fees while the property is not occupied.
If there’s any new damage to the property or an outstanding account balance (such as owing a late fee), first, the tenant’s deposit is used to cover the cost. If the tenant deposit is not sufficient, then the tenant will be billed. If the tenant does not pay the bill in a timely manner, the debt will be reported on their credit and turned over to a collection agency.
In the case of an eviction, the landlord is given a copy of the eviction / collection paperwork. This allows the landlord to contact the collection agency directly in order to monitor the balance.
If a tenant is evicted, in order to prevent the tenant from getting back into the property, Soldiers of Real Estate places a temporary lock on all entrance doors.
The information listed above is only a guide and is subject to change. State/Federal law, the owner's property management agreement, the tenant's lease agreement and standard industry practices are the ultimate authority with regard to leasing property.