A common question we get when we tell people we’re moving into an RV full time is “What are you going to do with the house?” For a number of reasons, we’ve decided to rent it out for a year and then re-evaluate. This saves us the challenge of trying to sell the house while we’re on the road. With current prices, the rent will easily cover our mortgage plus all taxes and management fees with a little left over to cover most maintenance issues. Most importantly though (especially for Allison) is that it psychologically feels better having an “out.” We maximize the number of options we’ll have after a year and we get to leave some tiny amount of roots here in Denver in our heads. It certainly takes some of the pressure off with regards to “we’re leaving everything solid in our life and will have no roots anywhere…”
But, there is still a lot of work involved with getting the house ready to rent. Most importantly, we need a management company to do all of the heavy lifting (and light lifting honestly) for us while we’re on the road. Over the past week, I’ve been talking with different property management companies to try to find out what works for us and what doesn’t.
At the beginning I’d just let them do their sales pitch and then ask what their rates were but after a few of them I learned a lot of different questions to ask that I had no idea about at the beginning. For instance, “if there are late fees assessed on the tenant, do you get them or do I get them?” In most cases they get them (which makes sense to me since they are the ones who are going to have to do the work to get the tenant to pay eventually) but some companies basically see this as a source of income. One company had a $100 late fee if 2 days late and $10/day after that. He actually told me that a judge told them they couldn’t charge that much because it was usurious on cheaper properties but they still do it on expensive ones. Seriously?
Another good one, “do you charge anything to the tenants above what you’re charging me?” One company had a 1.5% administration fee on top of rent that they charge the tenants that they didn’t tell me about in our meeting. I had to read about it in Yelp reviews and then go read the super fine print of their agreement to find it.
Also, “who pays for maintenance and do you have your own in house maintenance team?” On one end of the spectrum, it was a single guy running the company and all maintenance was done by him and his buddy at $40/hour. On the other end of the spectrum, one company told me that they are so large that contractors give them discounted rates that they don’t turn around and give the owners, they will charge “market” rates (which turn out to be $60/hour) to the owners and keep the difference “to offset how much cheaper our management fees are.” At least they’re honest about gouging us. Another company said “we make tenants pay for everything” and then told me a story about a tree root that clogged up the sewer pipe that they made a tenant pay for “because what would they do if they owned a house?”
So basically, they had to walk a fine line between selling their services to me, and making me feel like they would treat tenants fairly so that the tenants wouldn’t take out their frustration on our house (let alone if we decide to keep renting the house after the first year and want to actually keep a stable tenant). I think we’ve decided who we’re going to go with but just to give you an idea of what the fees look like in Denver, quotes we got were around 8-10% of monthly rent or $150/month which for our house are approximately equivalent. In addition to that, leasing fees anywhere from $495 – $750 or 40-50% of monthly rent. There was one company that came in at $40/month plus 100% of first month’s rent in leasing fees but that just sounded like they then made their money with high tenant turnover which sounded like misaligned incentives.
Most of them also offered a significant discount in leasing fees if we found the tenant ourselves instead of making them advertise the place (like $750 leasing fee became $250) so if you’re going to be looking to rent a three bedroom house in Denver around May, let us know!
It’s 3 bedrooms, 1 bath, ~1100 square feet in the University Hills neighborhood. 300 yards to the Yale light rail station. Super easy access to I-25, halfway between downtown and DTC. Includes central air, high efficiency washer and dryer, dishwasher, solar panels which cover about 90% of our electricity usage so much lower bills, and fiber optic internet speeds up to 1Gbps from CenturyLink. Wood floors throughout and pet friendly. Still working out exactly what to charge but we’ll let you know.
Follow-Up: Renting the House, One-Year Checkup