Q: I have been a landlord for many years and have always been quite successful with simply placing a rental sign in front of my property when there is a vacancy. However, the economy in my area is getting worse and I have had one rental house vacant now for more than three months. It’s tough to have to pay the mortgage each month without rent coming in for this property.
A local Realtor has seen my sign for so long that she keeps calling me and encouraging me to sell the property. But the sales market is so soft that almost all of my equity is gone and I don’t want to give it away.
I spoke with another landlord recently who told me that he’s also had more trouble than usual but has begun using leasing agencies that specialize in matching up tenants with landlords. I checked out the company he recommended and they charge a full month’s rent to place a tenant in my property. That seems like a lot, but I don’t seem to be able to generate any good prospective tenants on my own. Do you have any thoughts about leasing agencies?
A: One of the recent trends in rental real estate is the emergence of firms that assist tenants in locating rental units. These services are available in virtually every major metropolitan area. Some offer their services for no charge to the renter and are compensated by the landlord or the property manager when the prospect signs a rental agreement.
Other rental locator firms charge tenants for their services and are compensated only when they find a rental unit that meets the needs of the renter. These are often companies that work with employers who are relocating employees to the area for high-profile jobs. With the current economic downturn and likely an overall reduction in relocating employees, it may be more difficult to find leasing agencies that are paid by an employer.
Although most owners of single-family, condo, or even small- to medium-size multifamily rental properties do not need the services of a leasing agency, there are some definite advantages to consider.
Leasing agencies that get paid by the landlord or property manager are likely to have close working relationships with major corporations and relocation services and have excellent tenants looking for rentals.
These tenants relocating into an area typically do not have the time to search for a rental property and want the leasing agency to handle matters for them. They also are not often candidates for purchasing a home, because they will be staying only for a specific assignment or because they want to rent in the area before making a purchase decision. …CONTINUED
However, there is often a trade-off with these renters: They are usually very well qualified, but they are not as likely to rent long term. The reality is that not all tenants will stay for a long period of time anyway, and if you know that the tenant will be with you for only a set period (such as a one-year lease) you can adjust the rental rate to reflect this rental term.
Q: I have a home I rented out for five years and now the tenant has moved. I know I will have to paint and make several minor repairs. The tenant is insisting I return her cleaning deposit, but the house was not as clean as when she moved in.
For example, the kitchen fan, cupboards, closets, windows and floors are not clean. I will have to hire someone to do basic cleaning. Can I deduct this from her cleaning deposit? I have wood floors and will need to have them buffed. Would she be responsible for keeping the floors in the same condition as when she moved in or is this considered normal wear and tear?
A: In most situations the "normal wear and tear" provision does not apply to cleaning. So you would be able to deduct reasonable cleaning charges for any items or portions of the rental home that were not at least as clean as they were when the tenant moved in.
The wood floors that you feel need to be buffed would likely be subject to an allowance for wear and tear, and that expense would not be passed along to the tenant. If there was any damage done to the wood floors during the tenancy, then you can charge the tenant. Be sure to ask the contractor to give you detailed billing that separates the buffing of the floors from any charges for damage. You should always offer to show the tenant copies of all invoices or receipts for any work you have done at the end of a tenancy.
This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and "Property Management Kit for Dummies" and co-author of "Real Estate Investing for Dummies."
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