My Mini-Business Plan for Renting my house

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Okay, I have decided that as of next summer, I'd like to rent out hte house I live in now, and then take that money and transfer it into a second house down the beach that my parents own but are having trouble floating as a second property. It's been in the family (well, the "trailer" we call it as a family) since 1976 and I'd hate to lose it as I would like to retire to it one day (it's in Wildwood, NJ).

Whether I would take that money and use it for an "equity transfer" or I'd simply pay my parents "rent", we'd have to work out. My parents have tossed around the idea of hauling "the trailer" away and plopping down a new double wide modular with a base price of 91K.

So. . .I live near all the South Jersey beaches (Brigantine, Ventnor, Ocean City, Atlantic City). My "business plan" is to target people who want to rent their place out for the summer on the beach, but they work in the area, so they need a summer rental offshore to create this win/win situation.

Here are the major points of my business plan:

1. Rental term: June 15th to Sept. 15th.
2. Monthly rent: $1600/month or $4500 up front.
3. Monthly costs: $543/month mortgage + $250/month/taxes + $300/month/insurance (higher for landlord insurance)
4. Security deposit: $1600, held in escrow
5. Bathroom is being remodeled soon because it's like a "frat bathroom" as of now. Rest of the house is "okay" at this point, but needs some dressing up. I have til next summer.
6. Take detailed pictures of house, store in computer with back-up. Give to tenant upon signing lease to demonstrate property condition.
7. Retain real estate attorney to draft lease (one time fee for many summers but I think worth it), for the legal things I haven't thought of.
8. Have tenant supply linens and towels, but furniture, plates, utensils, etc. are supplied. Plenty of storage in basement - move my "stuff" into basement minus valuables, of course.
9. I, or one of my sons, will mow and maintain lawn.
10. Accept tenants with a 700 credit score above at above terms. If below. . .raise rent to $1800/month. (it's a 4bdr - I may be able to actually get $1800/month for a 4 bdr.).

Anything I am not thinking of for all of you landlords out there?

[creditcardfree]

Not a landlord, but I like your plan!!

[rj.phila]

credit score contingency is worthless, IMO, as a landlord. there's not much correlation there, as far as trustworthiness. much more important, if you are trying to filter tenants, is employment. currently employed is almost a necessity, length of employment a better indicator than credit score.

most important is gut feeling. get them on the phone, dont do that **** over email.

[JoshuaHeckathorn]

Look for better landlord insurance. Are you really paying $300 per month? If so, that's a rip.

[krantcents]

I would also check to see if they have ever been evicted from an apartment or house. When it comes time to approve the application, visit where they are living to see how they care for that place if possible. Many people who rent their homes for a sumer rental use agencies to do some of this "dirty" work. They will also check on the tenant during the rental as well as take the repair calls.

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Well, here's the scoop on "landlord insurance" - I went to my agent and they said I'd have to get a policy for 3 months, let's say April 1 to Oct. 31rst. When they ran that quote, they said $2000.

I pay $889/year right now for just a vanilla homeowners. . .which I would have to pay also for when I am living in it..

She then said she could do something to get the quote down to $1000.

So, for 3 months over the summer, the quote was $1000 or $333/month I have to pass on to the tenant.

Crazy, huh? I told him I don't think i could do this at $2000 and then it changed to $1000.

I was going to shop around w. different agents.

Banks and Insurance companies and their cohorts, lawyers, stifle business and investment, don't they?

[JoshuaHeckathorn]

Well, here's the scoop on "landlord insurance" - I went to my agent and they said I'd have to get a policy for 3 months, let's say April 1 to Oct. 31rst. When they ran that quote, they said $2000.

I pay $889/year right now for just a vanilla homeowners. . .which I would have to pay also for when I am living in it..

She then said she could do something to get the quote down to $1000.

So, for 3 months over the summer, the quote was $1000 or $333/month I have to pass on to the tenant.

Crazy, huh? I told him I don't think i could do this at $2000 and then it changed to $1000.

I was going to shop around w. different agents.

Banks and Insurance companies and their cohorts, lawyers, stifle business and investment, don't they?

I would find a new agent. While landlord policies are more expensive than regular homeowners insurance, your agent is quoting you an annual price of $4,000! I don't know the value of your place, but that sounds crazy even for a very expensive home. I have rental properties in an area with rather high real estate values and my landlord policies are much less.

I just noticed that you said the quote was for 3 months, but then listed dates from April 1 through Oct. 31. That's 7 months. Which is it?

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Sorry, that was a misprint.

I want to rent it for only 3 months, but they recommended a landlord insurance of 6 months - April 1 to October 31rst.

It sounded high to me too. . .but I guess the insurance companies don't like you switching around? I am not sure honestly.

[riverwed070707]

An alternative to the renters insurance policy would be to require the renters to get their own policy to cover their belongings and such (really cheap for the renter) and show proof. Your homeowners is still going to cover the basics minus the renters posessions -- the purpose of a landlord policy is to help cover damages done by the tenant. If you're taking in a damage deposit and they are only going to be there 3 months this seems silly to me. I think it makes sense in some cases, but not yours especially if you're going ot be close enough that you can regularly check in on them.

[JoshuaHeckathorn]

An alternative to the renters insurance policy would be to require the renters to get their own policy to cover their belongings and such (really cheap for the renter) and show proof. Your homeowners is still going to cover the basics minus the renters posessions -- the purpose of a landlord policy is to help cover damages done by the tenant. If you're taking in a damage deposit and they are only going to be there 3 months this seems silly to me. I think it makes sense in some cases, but not yours especially if you're going ot be close enough that you can regularly check in on them.

Insurance companies don't like it when you rent out your residence and don't have the proper coverages in place. A basic homeowner's policy will likely not cover damage done to your place once they find out it was done by a tenant. If you're taking a big enough security deposit, it might be worth the risk, but I'm on the conservative side when it comes to insurance. I've had major things happen in the past to my rental properties, and trust me- you want to have the right insurance in place when bad things happen.

I think if you find the right agent/insurer, they'll be willing to write you a landlord policy at a more reasonable rate. It really shouldn't be much more than your existing policy- perhaps around $1,000. $80 per month or so sounds right, but I suggest getting several quotes. When you don't need it anymore, cancel it.

Oh, and your renters should always have their own renter's insurance as well. That's a given.

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Insurance companies don't like it when you rent out your residence and don't have the proper coverages in place. A basic homeowner's policy will likely not cover damage done to your place once they find out it was done by a tenant. If you're taking a big enough security deposit, it might be worth the risk, but I'm on the conservative side when it comes to insurance. I've had major things happen in the past to my rental properties, and trust me- you want to have the right insurance in place when bad things happen.

Yes, agreed. . .I do have in place in my business plan for a renters insurance but that's just for their own stuff.

However. . .like you, I am conservative when it comes to insurance. I work as a doctor in the field and learned for too long, if an insurance company can get out of paying, it certainly will and never shed a tear.

They have no mores and there are certain Political Parties that fight to keep the Power of Big Insurance, Big Banking, and Big Oil in place. Those are 3 industries, along with casinos, where the house always wins. At least with casino's though, you get some amusement for your money.

I know what river is saying - it would seem overredundant to have renters insurance and landlord insurance and then a normal homeowners.. . .I'd say insurance is the most complicated part of this business plan.