Renting out a house

[Fishinmission]

For the folks on here who have rental properties -

Long story short I have a 5 Bed 4.5 Bath home in a pretty good spot in Mt pleasant. ( BR count is high, but not a huge house, 2000sqft ) I fully gutted and remodeled 3 years ago, so the finishes are nice and updated. Buying a house was my goal since I was young and I worked hard at it, now I want it to work for me. Im 25 and ready to not have roomates. I am going to build a garage apartment in the back yard and live in that, and rent out the house. Eventually turn it into a dual rental property once I get ready to build a house hopefully in about 5 years or so.


Questions I have for the folks experienced in this:

Short Term ( Air Bnb etc. ) or long term rental (typical 1-2 year lease) ? (Leaning towards long term)
Property Management company or do it yourself? Im leaning towards DIY (Im pretty handy and work in construction industry so anything I cant handle I know someone who can.)
What stipulations can I set when looking for renters? Im looking for a family, not a group of partiers or anything.
Do you guys offer discounts if someone is looking to sign a longer lease? I.e someone asks price for 3 years as opposed to 1 year lease.


Also interested in hearing good and or bad experiences, and why.

Thanks.

[Islandguy85]

Not sure exactly where your house is but if you go the short term route be sure your neighborhood allows it. A friend of mine was doing this in Mt P and then his neighborhood HOA outlawed it. As far as I know the renters were never an issue but the neighborhood decided they didnt want it going on. He also has a place nearby so it is easy for him to just move out of the main house whenever.

Short term rentals I think require a little more work and effort but they can pay off well. There were many times that he could rent his house for a long weekend and more than pay the mortgage. I dont actively rent properties but I am guessing you may have to report as income for tax purposes and also have the home refiled under non primary residence.

Long term is more acceptable in most areas, will rent for less, but will have better tenant security in general. What can get you at times is between renters. I have a few in my neighborhood and at times it seems it goes 1-2 months empty.
One neighbor that rents her property out for $2200-2500 says she has issues with credit. Im not sure how much I would be concerned about that if you collected a fair amount of rent/security deposit up front. That being said, I am pretty sure right now it is next to impossible to evict someone. Depending on the price range of the rental, it will likely attract people that currently make good money with bad credit or people new to the area that want to rent before buying.


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[mudflat]

If you can handle the stress, no property maintenance company for me. Giving up 10% usually.
Keep it as your primary residence as stated, taxes will triple if not.
Long term rental, if they pay on time and don't complain alot, I keep rent same as their first year there, granted longest renter has only been around 3 years.
Taxed as income, if you owe on it that helps some in that issue.
They are all a gamble, most renters have some baggage. Look them up on county index, do a background check, then pray you picked the best. It has its rewards, your thinking the right way for gaining wealth. Prepare to be fucked for that.

[charlie horse]

Check local ordinances on detached buildings with full bathrooms too.

[huntinghagen#12]

If I was going to live behind the house, I'd self manage. For my rentals we have a property management company, but the houses are around 90 minutes away. In my opinion, the property management company really earns their money from me when they find new tenants and evictions (if necessary). It stops me from having to deal with it myself. If nothing pops up and my tenants stay in place, they really don't do much except collect payment. Even with repairs and things like that, all they really do is report it to me, I have my own people I use for repairs so I send them out. There are several online property management companies that charge hardly anything (less than $20/month). They do all of the payment collection as well as having a portal tenants can log repairs or anything else that is needed. I plan on trying this out with the next rental property I purchase. If it works well I'll eventually switch everything to that, if it doesn't I'll put any new properties under property management as well. One of my realtors uses an online PM company, she hasn't had any complaints in the 6+ months she has used it.

It's hard to say on vacation rentals, it works if you're in an area with demand. I looked into it hard for a property I bought and rehabbed near a ski resort, I ended up flipping/selling that property though and chose not to hold onto it as an AirBnB.

Nothing wrong with advice you get on here, there are plenty of people with experience, but definitely check out www.biggerpockets.com. That website is a wealth of knowledge with everything from people who own one duplex, to people that have thousands of doors under their control. It's a pretty responsive forum as well, even though pretty much any question you can imagine has already been asked and can be found with a search.

[Bad Habit]

When we became empty nesters we rented ours and got enough to live at the beach-This worked great for us
#1- no section 8
#2 credit check and prior rental references
#3 Make a printed photo album of every part of the entire house with a checklist for each room , you and the tenant agree up front on condition and both sign each page- the yard is also part of the house as is the driveway, mailbox, curbing ,sidewalk etc- anything they could possibly damage- the same is done when they leave
#4 All occupants should be listed on the lease by name- no one else can move in without written approval from you
#5 deposit should equal one months rent minimum- have it written in the lease that it can not be used for the final months rent
#6 have it written in the lease that they are responsible for all damages including beyond the cost of the damage deposit- we had to take 2 tenants to court for excessive damages and got 100% paid both times- the photo album sealed the court case
#7 no sat dishes, landscaping changes, color changes etc without written approval- you're in construction so consider it a change order to your lease (contract)
#8 allow for a once per month inside inspection by yourself with 48 hour notice
#8 have the lease written by a professional so it will stand up in court

You need to read up on the responsibilities of a landlord in SC

For many- you living on the property will be a deal breaker- most don't even want the landlord in the same neighborhood- they feel like it intrudes too much on their privacy. This does not mean they are a bad tenant.
We rented before buying our house, and at Folly while our house was rented out - and it would have been a deal breaker for us- and we always left the house perfect and got our full deposit back

[mudflat]

My experience is they leave the last month without paying. I've used the deposit to cover that. Magistrate will give a judgement but I have heard collecting it is usually a lost cause. Busted door and frame has been my worst repair. Expect a few holes, regularly painting, on each turnover. If I could find someone to manage for 20.00 a month they could have it. I like collecting the rent by hand, gives me a chance to see property, make sure grass is mowed, which their idea of maintaining and mine has varied greatly, ask if any problems, etc. I only live 15 min away though.

[Fishinmission]

Thanks for all the responses so far guys. Definitely gives some perspective.

I'm honestly planning on being able to rent this out without having to list it. I have had some family friends mention they would be interested etc, but want to be prepared if that doesnt pan out. I plan on a full interior paint touch up and will document everything then.

For reference, I am planning on renting this house out in the 3,000$ range, so hopefully that will help with the tenant pool. I totally see why me living out back would be an issue for them, but if they do sign the lease i'm confident it wont be an issue unless they are real jackasses. I work from 6:30 am until atleast 6 or 7, am never home on the weekends and I am not the loud party type.

The more I consider it the more I think the property management company has its perks for 10% because I dont have a ton of time to mess around with it, but at the same time I know once that first bill for a repair hits and I know I could have done it way cheaper I will start to second guess that.

Alot to consider for sure.

[Islandguy85]

Thanks for all the responses so far guys. Definitely gives some perspective.

I'm honestly planning on being able to rent this out without having to list it. I have had some family friends mention they would be interested etc, but want to be prepared if that doesnt pan out. I plan on a full interior paint touch up and will document everything then.

For reference, I am planning on renting this house out in the 3,000$ range, so hopefully that will help with the tenant pool. I totally see why me living out back would be an issue for them, but if they do sign the lease i'm confident it wont be an issue unless they are real jackasses. I work from 6:30 am until atleast 6 or 7, am never home on the weekends and I am not the loud party type.

The more I consider it the more I think the property management company has its perks for 10% because I dont have a ton of time to mess around with it, but at the same time I know once that first bill for a repair hits and I know I could have done it way cheaper I will start to second guess that.

Alot to consider for sure.

Just remember to protect yourself. You have to ask why someone would be able to and willing to rent a $3,000 home? Generally one of two reasons that I referenced above. Their credit sucks or IE declared bankruptcy and left someone holding the ball in the past and cant get financing for their own home OR the better of the two, they are new to town and looking to rent before buying in the area. Generally, the latter wants to rent no more than 12 months and often times 6-8mos.

Edit: OR tenants could be multiple younger/single individuals and I think that could present its own issues within itself with rent, damages, problems in general. Not to say you cant get a good group in there but I think of it from personal experience when
I was young in college and what my male friends houses generally looked like when they moved out vs my now Wife’s houses as well as her friends. Needless to say, I would generally take the female tenants in that situation.

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[waterbreaker]

Try to set it up for corporate lease. Lots of people moving to the area with Volvo, Boeing, Nucor etc. Often times the money comes form the corporation and they always pay and tenant will have to keep house up or face consequences from work.

[Highstrung]

people are nasty

[Fishinmission]

people are nasty

This is the only thing that stopped me from doing this a year ago. People suck for sure.

[Birddawg]

That advice on property taxes may not be the best. I used to manage 40 single family homes and I had multiple owners try to not tell the county it was no longer their primary residence and they got caught and had to bay the back taxes, which the mortgage company covers. Then they adjust your escrow to cover what they paid AND the new tax rate. I had one lady have her mortgage go up $600 a month and this was on a 200k house in summerville. I don't know what your house is worth but I am guessing north of 300k so the property taxes will more than likely be much higher than hers was.

Get learnt on 4% vs. 6% tax rate and you will want to burn down the assessors office. As noted, it WILL triple your property tax bill. It is complete horseshit if you own rental property. The law (IMO) was originally designed to fuck people with second vacation homes, but it makes it really hard on a small guy to own a rental or property or two. A basic rule of thumb I use for my previous clients and my current rental(s) that I have is that it takes 3-4 months of rent to cover taxes and insurance. That is a very basic rule, but it seems to apply pretty well for a quick assessment.