photo source: pamelaklaffke's shop on etsy
Jen Boulden, a small business advisor, didn’t intend to become a landlord. But when a job opportunity pushed her out of Montana and into L.A. in 2009, she had to make a tough choice:
Sell her house in a down market, or ...rent it out as a vacation home?
Boulden, who consults with DailyWorth, decided to pursue “the Holy Grail of modern life: passive income.” Her moxie paid off.
Here’s her advice:
Know your market. Boulden stresses that her house was well-suited to be a vacation rental because of its history and appeal to tourists. Evaluate your potential rental as you would any product: Who is your customer? A tourist or year-round tenant? Families or college roomies?
Do the math. A tenant would provide steady income of about $1,700 a month, Boulden calculated, but vacationers would pay almost as much for one week. She chose the higher revenue over the steadier one.
Check the time. With her background in marketing, it didn’t take her much time to set up multiple rental listings, join the local Chamber of Commerce and coordinate cleaning people and contracts. If that stuff makes you sweat, think twice about taking on a rental property, and read MP’s post on her experience here.
Buy stock in Advil. Even the perfect rental comes with headaches, Boulden warns. There’s property maintenance (e.g. after a Labrador puppy clawed up her stairs), routine breakage and loss. Boulden’s “replacement” budget is about $1,000 a year, on top of what she withholds from tenants’ deposits for damages.
Deduct it. As a landlord, you can deduct many repairs and expenses pertaining your property. But you have to be prepared to pay those costs out of pocket.
People are peculiar. No one has ever walked off with a rug or her sofa, but Boulden says she has gotten odd demands (curtains for the glass pane of the front door), and dealt with tenants’ compulsion to rearrange the furniture. Needless to say, Boulden doesn’t leave valuables around.
Boulden relies on a few top-notch websites to list her property: VRBO.com, homeaway.com, and itravex.com—in addition to a local rental agency. And alice.com is a handy service that allows you to buy home and cleaning supplies and ship them, free, to your property.
And keeping your property as a rental means you can occasionally visit there yourself, “and put the furniture back where it belongs,” says Boulden.
State your terms. Have you ever been a landlord?