Whether you plan to turn your home into a rental property, or are purchasing a property to rent out, the steps are the same. You need to be aware of local laws, keep organized paperwork and accounting, price the property appropriately and vet the people who want to move in. Regardless of whether you manage the rental yourself or hire Destination Maui Realty to manage it for you, you’ll gain more from your long-term rental property and save yourself from many tenant headaches by understanding these 10 steps:
Make sure you’re allowed to rent the property
If you live in a homeowners association, check for rental restrictions and find out if the local government requires a rental license or inspection. For example, you must obtain a Hawaii General Excise tax license, and if you plan to make your rental available to HUD tenants, there are additional requirements including an inspection. When hiring a licensed agent through DMR, we make sure clients are in compliance.
Know the local eviction laws
Talk to a real estate attorney or your professional property manager to find out how the eviction process works in Hawaii. In some instances, you can remove a non-paying tenant within a month or less, but in other circumstances, especially if you do not know how to give proper notice, it can take months and months — during which you’re not being paid.
Establish the rent Do market research to set your rental price. See what similar homes are renting for on Craigslist, in the local newspaper, and on the local multiple listing service. If you allow pets, compare pet-friendly properties’ prices. When you work with Destination Maui Realty, our rental agents are also licenced realtors. We will do this research for you and recommend a rental price. Of course you have final say.
Do your rental home paperwork Here are a few administrative to-do’s if you are self-managing:
You do not need to keep deposits in a separate bank account in Hawaii, but keeping these funds separate and having a bookkeeping system is a good idea.
Make sure your homeowners insurance policy is updated as an investment property.
Open an account with a company that does credit and criminal history background checks on prospective tenants.
Have a local real estate attorney draft a lease and a rental application for you.
Set the minimum credit score, credit history, and income you’ll take.
Photograph your home with your furniture in it
Stage and take pictures of the rooms before the first tenants move in. That way, if your current tenants have awful decorating taste or are clutter bugs, you can use your pictures to show your house in its best condition when searching for new tenants.
Advertise everywhere you can Sites such as Craigslist offer free ads, but watch out for check scammers who answer your ad along with the legit renters. Our agents have a wide network of channels to promote rentals.
Group showings into one or two days per week
When you respond to prospective tenants, showing the house every day wastes your time and annoys your current tenants. Having multiple groups viewing the property at the same time will make prospective tenants realize they could lose the place if they don’t make an offer.A Friday night showing gives you a jump on the landlords doing Saturday showings. Follow up with a Sunday showing to catch everyone who couldn’t make Friday night.Be prepared for no-shows. It is common for people to make an appointment and not show up.
Get completed and signed application forms Get a completed application and collect a nonrefundable application fee from everyone who wants to rent your place to cover the cost of you vetting them. The signed application (if worded correctly) allows you to legally do a background and credit check. Anyone who won’t fully complete and sign an application or pay a nominal application fee isn’t a serious applicant, so don’t waste your time vetting them.
Verify everything the tenant says on the application.
You’ll definitely want to weed out prospective tenants who give you a cell number that’s answered by a friend pretending to be the applicant’s employer or landlord.
Look up the phone number for the employer and verify employment and income with someone in human resources.
If you can, call your prospective tenants’ previous landlord — not the one they currently have. If they’re bad tenants, their current landlord may tell you they’re wonderful — just to get rid of them.
You must consider all tenants that meet your income and credit requirements.
If you don’t, you risk violating Fair Housing Laws. When you make your selection and have a signed lease, first month’s rent and a deposit, contact everyone else who wanted your house promptly so they can move on.
Please give us a call if you would like to discuss the option of self-management or hiring a licensed property manager through Destination Maui Realty.