What you need to know about renting-out your place and becoming a landlord

There are many reasons why an owner would consider renting:

  • Do a favor for a friend or family member
  • Diminish a loss
  • Cover costs
  • Make a profit

Should you even be a landlord?

If you have never been a landlord before...then one good test is to ask yourself:

Am I the type who might react in this manner: "look what they did to my sink!???"

If that reaction sounds anything like you, then just stop now because you should not be a landlord.

  • Leasing Annually

    If you are leaning toward a more stable, manageable leasing option, in the end an annual tenant probably costs you less time, money, and aggravation because you only have one party to deal with, and only one party moving in and out for the year, and they stay.

    Naturally, frequent tenant turn-over results in more damage to the home (and more money, time, and aggravation) because you expose your property to more and different people. Every time someone new moves in, moves out, has guests, has pets or uses an appliance... something in the house takes a hit.

  • Leasing Seasonally

    Keep in mind many communities have restrictions, but regardless, the likelihood of covering costs or making a profit with a seasonal rental are extremely low...  unless one of the following is true:

    1. You own a property purchased long enough in the past that its cost basis (tax, insurance and monthly fees) are low and its usage restrictions do not interfere with vacancy
    2. You have a place that is so "macked out" and in such an ideal location that its reputation amongst the well-to-do is synonymous with, "Let's go eat at Spagos."
    Seasonal tenants come for 2-6 month stints (usually between November and April), and you can believe that most treat your place no different than a rental car.

    More often than not, keeping it vacant just makes more sense financially and also from the standpoint of aggravation.


Remember that if your home is a member of an HOA or COA there may be unfavorable restrictions on your rental plans. If you ignore those rules and get caught you can be liable for fines, and if the tenant had to vacate you could be sued. An existing violation typically blocks a sale from completing should you decide to sell.

Following are typical restrictions:

  • Can't rent at all, or can't rent until you have owned for more than 1 or 2 years
  • Can't rent more than X months in Y years
  • Association must approve of all tenants
  • Association requires tenants to have a credit history to approve (no foreign nationals)
  • Minimum lease is X months
  • Tenants can't have pets
  • Tenant's must join club and pay membership fee
  • Tenant cannot keep a truck on premises

Multiple and frequent rentals that function like Airbnb

DEFINITION: Be aware of what is considered "Transient Public Lodgeing Establishment" - Any unit, group of units, dwelling, building, or group of buildings within a single complex of buildings which is rented to guests more than three times in a calendar year for periods of less than 30 days or 1 calendar month, whichever is less, or which is advertised or held out to the public as a place regularly rented to guests.(sip FL state Gov)

If it looks like you are running a hotel without a hospitality license and its unknown to or against the rules of your association, you may face fines and charges from your building, community, municipality or the state. Don't be surprised if the neighbors report apparent illicit activity, even if that's NOT what's going on.

If in fact you are legitimately renting multiple times a year you will be liable for "Transient Accomodation" which carries a 6% sales tax. Dont forget to plan for that because the state will come looking for their money.

Renting (leasing) commercial or multi-family property for a profit is the very reason anyone makes this form of investment in the first place.

When someone owns ONLY one solitary single family residence, and they decide to rent it, it is either the beginning of a portfolio of similar investments or it's a fallback position:
  • You haven't been able sell at the price you want so you rent - “If I don’t get my price, I’ll just rent it out!”
  • You are faced with a financial loss but you are not ready to sell - “It costs a lot to maintain unused, so I’ll rent it out to reduce the loss.”
  • You want to wait for the market to change fast AND furiously upward - “I’ll just rent it out and see how the market goes.”
  • The property is not a priority, and you just want to cover costs - "I don't know what to do right now and I'm not comfortable with market prices, so we'll just rent it out for now.”
Owners with only own one solitary single family residence that was not intentionally bought to lease out at a profit, will typically find that renting it out is a costly decision. That's because with few exceptions, profit is only achieved when purchased for profit to begin with: at a specific price to get a specific return.

So unless you intentionally bought the place at a price that by calculations was able to provide a profit, you are not likely to generate one.

Here are some typical assumptions you may be making about renting your own residential property:

  • The market will go up enough in the near future for you to be satisfied with the sales price you will get
  • The place will be rented 100% of the time, at the monthly rate YOU want
  • (Rental Income - Expenses) > Total Costs
  • The tenant will be trouble-free, follow rules, and take care of your place
  • There will be no new assessments while you are still the owner
  • Borrowers will have the same capacity to buy next year

Here is the reality about renting your residential property:

  • Applying THE MOST speculative outlook for growth, (a 3% annual appreciation), it takes 3-7 years for the market to grow enough for you to get the 20% premium you want today. By then, psychologically, you will want an even higher price, and this cycle repeats.
  • There are few unplanned situations where (Rental Income - Expenses) > Zero + Worth the hassle. Those who bought a decade ago or more in a normal market, or those who inherited are the exception. The remainder will end up with a monthly loss. The rules alone in most associations may restrict you from renting at the frequency or time period that you would need to cover costs.
  • While you continue refusing lower offers or waiting for someone to pay the price you want, you incur losses from carrying the unrented property month after month after month: Taxes, insurance, homeowners’ fees, mortgage, utilities etc.
  • You must be prepared for managing any tenant:
    • complaints to repair
    • chasing late or unpaid rent
    • repairing or replacing whatever wear, tear, and damage that occurs while they are in there
    • dealing with the association when the tenant breaks rules or causes you to pay fines
  • If you decide to sell while your last tenant is in the property, don’t be surprised when they don’t comply with showings even though they may have agreed to do so in writing within their lease.
When you consider the costs, aggravation, and how much you will actually net (take home), the decision to rent out rarely makes financial sense. If you ultimately rent, please do your due diligence, and be sure to follow my guidelines for securing a star tenant.

Please take my only advice

Don't give in to unknowingly subsidizing the lifestyle of those NOT dear to you, unless the lease is actually providing you a benefit, or unless you have no other better choice.
Holding on to a losing investment is no different than paying for an employee who does not work.
If your rental is ACTUALLY generating a profit, worth the risk, time, and aggravation... then you have a great investment! 
Remember: a stock, bond, or insurance instrument could possibly earn the same money but does not call you at 8pm Saturday evening to complain, and has no walls to make holes in, no tiles to crack, no appliances to break... and no one can sue you for getting hurt while inside one.

If you have decided to rent-out your place

If so, it is important to complete an honest calculation to determine if it will ACTUALLY generate enough income to be worth the risk, time, and aggravation. Start by calculating:

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+ Income (click)
  • Research the monthly rental rate you might expect to get based on similar homes in your neighborhood or other apartments in your building that have rented over the past 6-12 months.
  • Multiply the monthly by the number of months you will rent in any year and then determine the total sum you should expect for the year, the revenue.
  • Most people factor in 10% vacancy rate, so take that revenue amount and subtract 10%.
- Cost/Expense (click)
  • Monthly or quarterly maintenance fees
  • Real estate taxes
  • Insurance
  • Financing if there is a mortgage
  • Utilities that you will be paying
  • Assessments if any
  • Costs for lawn/pool/pest control, etc.
  • Costs for advertising the rental
  • Costs for a Realtor
  • Costs for a tenant credit check
  • Costs for repair or replacement of appliances, etc.
  • Property management
? Risk/aggravation (click)
Consider the following:
  • “The refrigerator’s broken,??? “The roof has a leak,??? “The air conditioning is not working.???
  • “Your tenant’s kids are leaving trash on the lawn and you will be fined.???
  • Advertising, interviewing, and validating potential tenants
  • Chasing late or non-payments, or bounced checks
  • Repainting walls, cleaning rugs and tile
  • “We bought a house and need to break the lease, so we need to work out what we will pay.???

Now make your calculation:

+ Income – Cost = Net Income

Net Income > (Risk + Time + Aggravation) ?

Who pays for what?

 What tenants typically pay (click)
  • In Condos
    • The tenant is usually only responsible for electric, cable (when not included in the owner’s fees) and insurance for the inside contents... which should be required by you regardless of whether the association demands it or not.
    • Typically, water and garbage bills are part of your owner’s monthly or quarterly fees.
  • In Single Family Homes
    • The tenant usually pays for gas, electric, water, cable (when not included) and you should require them to buy insurance for the inside contents.
    • Waste disposal services are usually part of owner’s property taxes every year, depending on the municipality.
    • You can always review prior rental listings, or speak with a colleague in the neighborhood who has leased before, if you want to confirm.
  • Utilities
    • Any other service they want which is not covered by the landlord’s regular homeowner payments is paid by tenants.
    • Tenants can sign up directly at the local utility distributor and will typically need either an executed lease or a letter from a different service addressed to them at the same property where they want the service.
  • Deposits - To consummate the lease, the tenant will typically be required to deposit these payments in advance:
    • 1st month’s rent
    • 1 month’s advance rent
    • Security deposit in the same amount as 1 month’s rent
    • Pet deposit (if applicable) which you decide. I use $1000.
 What landlords typically pay (click)
  • Taxes, monthly/quarterly fees
  • External and disaster insurance
  • Landscape maintenance
  • Garage space
  • Reasonable property maintenance. As an owner, I would always pay for:
    • pest control
    • pool care
    • yard/lawn maintenance
  • (Think about what would happen if the tenant didn't properly care for these.)
In other countries, landlords may pass some of these costs onto the tenant separately. Here in the US, however, it's simply part of the rent you are charging the tenant. Don’t go trying to increase the rent to cover these costs to the point that you are no longer competitive, because you will find that tenants will go elsewhere to rent.

What you will need from prospective tenants

It’s better to have your place empty and losing money than to have let a dead-beat tenant into your property.

A bad tenant brings with it as much turmoil as identity theft, takes months and thousands of dollars of loss and cost to resolve... and you will be the proud sponsor of a local attorney's child's college fund. The following are what you should be prepared to require of any prospective tenant in order to evaluate them and have them be accepted by your association (if your home is part of an association):

  • Proof of credit worthiness
  • Proof of finances, employment and employment history
  • History of residence
  • Personal references
  • Proof of ID

Once you have a prospective tenant...

...go ahead and use our tenant application to send prospects a set of background questions that you can use to determine which one is the best candidate.

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  • Step 1 - Make sure you know what you will be getting into as a landlord. Many hate being a landlord, and for good reason.
  • Step 2 - Understand what your community and municipality will permit you to do, what costs the tenant will pay and what you will pay. (You obviously can't run it like a hotel without a hotel license or without paying a occupancy or "bed tax.") If your property is part of an association you may need approval while lease length, frequency, and specific usage are restricted.
  • Step 3 - Research the price range you can expect to get by looking at recent rentals of similar places. Remember prospective renters are looking at other places and if they can get a better value elsewhere that is where they will go.
  • Step 4 - Calculate the expenses you will incur.
  • Step 5 - Determine if you are likely to make a profit, cover costs or if you are going to end up subsidizing your tenant.
  • Step 6 - Assuming you are still OK with renting and it makes sense, you will list the property and screen candidates using our tenant worksheet. You will likely have to (and you should regardless) obtain a current credit report and criminal background check.
  • Final step - Once you have a good candidate let the real estate professional or an attorney draw up a standard lease from the state bar or real estate association, have them sign it and provide necessary deposits and get approval for them from the association if necessary.

tax planning for rentals

Entrepreneur Magazine's advice for structuring rentals
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