Renting out a condo is a big step for many folks, especially those that are used to remodeling homes, not renting them to individuals. Before you start in on this financially rewarding but often difficult path, there are several things you need to know. Beginners are often amazed at the number of pitfalls that come with being a landlord, and some of these pitfalls can be devastating to your financial well-being.
Types of Condo Rentals
Typically there are three types of condo rentals for investors. The first is the long-term renewable lease, which is usually written for one year. This lease could include utilities, or it may simply cover the living space, which means the renter has to pay the utilities and puts them in their name.
The second is the short term lease, which usually lasts for six months. This type of lease usually includes utilities to avoid the hassle and potential fees of switching utilities into another name.
The third type is a month-month lease. The tenant agrees to pay a monthly lease, puts down a security deposit, and agrees to give 30 days notice to the landlord before they move out. If they do not give this notice, the lease is void and they forfeit the security deposit.
Benefits of Renting Out a Condo
Renting a condo brings in revenue while you find a buyer. It can often cover your loan payments, or fund another project. Finding the right renter is imperative however. The wrong renter can cost you money and time, leaving you wondering where the benefit is in renting out a condo.
As an owner of a condo, you may also benefit from onsite property management. This means the condo association will handle the rental for you, and you can focus on other things. With onsite property management, someone is paid by the condo association to handle things like collecting the rent, dealing with tenants who do not pay the rent, as well as showing the condo to new renters.
In some cases they will even handle the evictions. You will have to pay additional costs in most cases for this service, but for many investors the time saved by onsite property management is well worth the extra expense.
If you don’t have a condo management company, consider hiring a real estate agent who will rent and manage the property for you, often working on a one-months rent commission for the entire year. Another option is hiring out an independent property management company.
Finding the Right Renter
The ideal renter is someone who is settled in their job, has a year or more at one company, and is past the tender age of 27. Usually, younger couples and young single people move every year or more until they find long term employment or get married. If you want a short term renter, a younger person is ideal, just stipulate your terms up front. Usually, a one-year or six month lease is best when renting a condo.