I talk to people about real estate management and investment all day, every day, and I love it.
I routinely speak with homeowners who want to turn their homes into rental properties, and they usually fall into one of two categories:
The first group purchased their home as an investment property to generate passive income.
The second group rents their homes due to unforeseen circumstances (e.g., relocating for a new job, being deployed by the military, or inheriting property from a family member). In the industry, we fondly refer to these rental property owners as “accidental landlords.”
Regardless of the circumstances, these people have many questions about our process of converting a home into a rental property.
Owning rental property and preparing it for your residents can be an intimidating undertaking. Like anything else, if you’ve never done it, the process can take a lot longer and become more stressful than necessary. That’s the funny thing about experience; it’s something you gain just after you need it most.
Luckily, my team has years of experience managing and investing in real estate, and I can share in great detail how we convert residential properties into rental properties with solid cash flow. By the end of these conversations, homeowners are either willing to hire Rentwell to guide them through the process or have a better idea of how to do it themselves.
In this article, I will share how Rentwell can convert your home into a rental asset. I intend to answer the most common questions about converting a primary residence into a rental property, give you an inside view of our step-by-step process, and give you an idea of what to expect from any property managers you hire. If you’re interested in turning your home into a rental property, I invite you to schedule a complimentary consultation with me after you’ve read through this article.
I remember being impressed when my parents prepared to sell their home in Drexel Hill, PA.
They painted the whole house, cleaned every nook and cranny, and made all the minor repairs needed to ensure it was like new and completely empty before they handed it over to the new owners, and those new owners were delighted.
Over the years, however, I’ve realized that not everybody thinks like my parents.
One of the biggest mistakes homeowners make is underestimating the amount of painting, cleaning, repairs, and general preparation required to list their property for rent.
As a result, they rush through the process, spend more money, and lose valuable time that they could have spent collecting rent payments. Rushing through the process often leads to poor work, resident complaints, high turnover rates, and, worst case, a refusal to move in based on poor conditions.
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Here’s the thing: The better job you do setting up your home for a renter, the better the whole process will go, the smoother your experience will be, and the faster you will begin to make money. As property managers, we show you how to spend your money in the best way so you can net the highest returns with the nicest rental property possible. |
We’ll discuss this later, but before we start painting, cleaning, and repairing, we do extensive due diligence to address your most significant home renting fears.
The first thing most property owners want before turning their home into a rental property is answers to some essential questions:
We always start by addressing these concerns before signing new management clients. Let’s look at how we address these questions individually.
If you ask me, "Will my home rent?" I assume you’re wondering if renting your home makes practical and financial sense.
If you’re reading this article, you probably have a general sense that your home is rentable. The problem is that you don’t have enough market information to make an educated decision. That’s what we’re for. We have access to historical data, which allows us to compare your home to others in great detail.
To determine whether your home is rentable, we begin by researching various things, including:
We also ensure your property meets rental safety and tenant rights regulations. Here are some of the questions we answer to determine if your home is rentable in no particular order:
By answering these questions, we can provide a clear view of your property’s rentability and ensure you understand the opportunities and obligations involved in renting out your home.
Once we’ve determined that your home is rentable and identified your target resident, we can answer your most pressing question.
Once we know that a home is rentable, we can determine how much you can rent your house for.
One of the primary benefits of working with a property management company is that you are simultaneously working with licensed real estate agents with access to tools and information unavailable to the general public.
We run various rental reports and use our 15 years of operational knowledge to figure out a rate that balances max income with the highest quality tenant who will stay the length of your ideal lease. We use these reports, along with public records, to determine:
Then, we run a series of calculations to determine the ideal rental rate.
Each home is unique, and there’s no one-size-fits-all answer to this question. The best way for us to answer is to get into the details and walk you through it.
The key to ensuring your tenants pay their rent and take care of your property lies in your tenant criteria, screening process, and reducing turnover.
Right now, about one-third of tenant applications are fraudulent. We address this concern with serious consideration.
Once you’ve signed with us, we’ll take you through a thorough process to determine your tenant criteria, ensuring you find the perfect resident without violating fair housing laws. These criteria include details like:
While these criteria are a significant piece of the puzzle, it’s our follow-up method to verify the information as valid that makes the real difference. How do you know if an applicant has actually given you their current and prior landlords’ phone numbers, not the number of a friend or cousin?
We know how to ask the right questions to verify all their information and uncover any fraudulent activity.
When it comes to tenant screening, licensed real estate brokers and property management companies have access to software that can identify these fraudulent applications, a sophisticated resource the average homeowner will not have access to.
In the meantime, check out some of our helpful free tenant criteria and screening resources.
The reality is you can’t be 100% certain that any tenant will pay their rent 100% of the time.
Most tenants sign their lease with good intentions, but sometimes, life happens. They could lose their job, have an emergency, or experience any number of incidents, leaving them in a tight financial spot. In these situations, we always do our best to work with the tenant before taking more drastic steps.
However, our rent collection statistics are very high. With our current portfolio, we have over 90% economic occupancy. If your tenant stops paying altogether, we know what needs to happen to get your property producing rental income again ASAP. We’re very familiar with the Pennsylvania Court system and the processes to avoid the landlord/tenant horror scenarios you’ve likely heard about. In some cases, this can involve working with an attorney. In many others, we can represent you directly.
When it comes to turnover, you need to understand something important about this industry.
Many real estate companies offer property management as part of a "lease first” strategy. Essentially, they use property management to generate leads for property sales by placing potential buyers into your rental home while they find another house for them to purchase. They use your home as an incubator to keep leads warm while they find a more permanent place for your residents to live.
This is the number one difference between Rentwell and other real estate teams and brokerages with management services. We’re the specialists in a room full of generalists. We manage rentals.
We’re not trying to accelerate the process of having tenants become homeowners by using your home as a stepping stone in our sales process.
Finding a long-term resident is our primary goal when placing your tenant.
Unless you plan to sell, you want your tenant to stay in your home for as long as possible. The longer they intend to be in your home, the more likely they will take care of it and treat it as their own. So, we find prospective tenants who match your criteria, pass all phases of our screening process, and plan to stay in your home for years in the future.
Once we’ve found that tenant, we ensure they live up to your lease through a thoroughly documented inspection process:
We inspect and document your property's state immediately before residents move in.
After three months, we perform our first property inspection to ensure the tenant is treating the property well, and we share those reports and videos with you.
Finally, we perform another property inspection four months before the lease expires.
If the tenants are still taking good care of the property, we’ll renew your lease and determine any repairs or maintenance your home may need. By doing this inspection four months before the lease expires, we can take preemptive action to maintain the property and fill future vacancies if the tenant needs to leave.
Okay, so I’ve answered the essential questions and, hopefully, addressed your top concerns. It’s time to move on to our next step.
Once we've determined that your property is rentable and know the optimal rental rate, we'll craft a custom pricing profile for you.
Typically, property management companies charge the first month's rent to place a new tenant, followed by a percentage of monthly rental rates.
We operate differently than most in our industry.
A while back, we recognized a significant pain point for single-family homeowners like you. We saw that if we overcharged our clients (using the traditional percentage pricing model), they wouldn’t get to keep the rental property long enough to see the long-term benefits. It was too costly for homeowners like you, so changing our pricing strategy to keep our clients long-term made good business sense.
So, we created the Rentwell One Rate. Here’s what it looks like:
We've found that building a custom pricing profile simplifies your budgeting and usually saves you money compared to the traditional percentage model.
The best part is that the Rentwell OneRate is entirely transparent. What you see is what you get. There’s no nickel-and-diming, absolutely no hidden fees, no overcharging for maintenance to collect a markup, none of that.
Plus, our staff loves it because this transparency allows us to operate much more efficiently.
This transparent pricing helps us gain your trust while eliminating the financial unpredictability of property management, making it easier for you to forecast your earnings and expenses.
You might wonder how Rentwell can afford to charge less than the industry average while maintaining high-quality service.
The answer is our business model and internal resources.
Unlike many property management companies that rely on subcontractors, Rentwell benefits from our sister company, RW Services. Our full-service maintenance company lets us control your maintenance and repair costs closely while ensuring the work is done correctly the first time, often at a lower price without subcontractor mark-up fees.
We win by handling a large volume of properties and achieving economies of scale. Our high volume allows us to spread costs and manage efficiently, passing savings onto you while maintaining excellent service standards.
Think of it like shopping at Costco: you get high-quality products at lower prices because of our scale and efficiency.
Once you clearly understand the value of our pricing, we turn to our property management agreement. This is the formal legal document that we sign with you as your property managers, not the rental lease that your tenants will sign.
What does our contract look like? I’m so glad you asked! Here it is.
We have no interest in burying the terms of our agreement with you under confusing legal language, so we’ve written this contract in plain language for anyone to read and understand. I invite you to bring it to a lawyer for review.
Once we’ve presented our agreement, we will walk through it and answer every question.
Then, once you’re comfortable with the agreement and ready to commit, we’ll sign it together and schedule your official onboarding call.
This is where the fun begins!
Once our business relationship is official, we start with a formal onboarding Zoom call where you’ll meet your designated property manager and the rest of our team. During this call, we will collect all the necessary details to create your rental strategy, including
We have a proprietary lease that we have developed over the last 15 years and continue to improve each year.
We’re very proud of this document.
Once again, it’s written in clear, plain language that anyone can understand, so there is no confusion about agreements and responsibilities when your resident is ready to sign.
Every home is unique, and because of this, we tailor your lease to your home's needs. Aside from your standard lease terms, our proprietary lease digs down to the personal details most standard leases overlook, including
Together, we will ensure that the lease includes everything you want as long as it follows fair housing laws.
By creating such clear agreements with your residents, we can protect your home to the best of our ability, with backstops in place should any issues arise.
Once you’re onboarded and your lease is in place, we turn our attention toward preparing your home for its new residents.
Imagine searching for a reliable cleaning service to clean your home.
First, you must call and meet with two or three companies to get a quote. Then you would need to rely on their reputation, trusting that they will do the work to your satisfaction, on time, without change orders and additional costs.
Now, imagine doing this with every vendor you need to get your home ready for rent: painters, carpenters, electricians, general contractors, HVAC specialists, etc. Finding and vetting these contractors is a ton of work on its own.
Luckily, we do this for a living, and we’ve already done the vendor management work for you.
We currently do about $5,000,000.00 in yearly maintenance, repair, and general contracting work. We know who to call to get things done right the first time, on time.
And we do it while providing you with preferred pricing, scheduling, and a much stronger satisfaction guarantee. We give our vendors a lot of business every year, and because of that, they work hard to continue receiving our referrals. That’s known as buying power.
Once you’ve become our client, you get full access to our years of industry expertise. We begin with a detailed inspection of your property to define the scope of work for all the maintenance and repairs that we need to do. Then, we can help you back into pricing that scope of work, with a minimum and maximum amount of work the property needs, to level the playing field.
Another significant benefit of working with us is our extensive database of renters looking for homes in your area.
Between our database and marketing efforts, we generally fill vacancies with qualified residents in 30 days or less.
We report the prior week’s activities each Monday, including all showings and applications.
Then, once we find the perfect tenant for your home, we will take them through our process and get them moved in as soon as possible.
Fantastic question.
But I think this is enough information for one article.
Stay tuned for my next article: How Do You Manage My Property Once It’s Been Converted to a Rental Property?
In the meantime, I would love to speak with you about your property management goals. If you’d like to learn more about how my company can help you, feel free to schedule a complimentary consultation at your earliest convenience. I look forward to speaking with you.