Tips for Managing Rental Property from Afar

Posted by Lauren Schneider on Tuesday, October 29th, 2019 at 9:30am.

Facing Military Reassignment: Should I Lease or Sell My Home?There's little doubt leasing a home when transferred to a new permanent duty station can be a smart financial decision for some military families. Although individual situations differ, if the new assignment includes on-base housing, or if a family's goal is to return to the home some time again, leasing is a good way to cover the cost of ownership and build equity for the future.

However, the prospect of becoming an absentee landlord can be a major headache. Carefully weigh the pros and cons of leasing vs. selling a Colorado Springs home, and consider all available options before making an informed decision.

For informational purposes only. Always consult with a qualified legal expert before proceeding with any real estate transaction.

Covering Expenses

When leasing a home, the goal should always be to cover the full amount of the mortgage, taxes, insurance, and incidental ownership costs, including HOA dues and utility charges a tenant does not pay. Breaking even is a win. It is rare leasing a home will result in any additional income, but even if the rent doesn't completely cover expenses, leasing might still be a good decision rather than selling quickly at a low price or taking a loss.

In the case of temporary deployment of one partner, leasing a home is also sometimes a reasonable option to free the remaining spouse from assuming total responsibility for home and family.

Legal Concerns

Never rent property without a binding legal agreement. Consult with a trusted advisor or ask advice from a real estate attorney. Either use a form approved by your state or local real estate association, or have an attorney draft a legal document for your use. The cost to make an agreement legally enforceable is well worth it. A handshake agreement, even with family or close friends, offers insufficient protection in case of damage, default, early departure, or the need for eviction.

Before you enter into an agreement, have a prospective tenant fill out an application; order a credit check, call references, confirm employment, and document funds are available to cover the required damage deposit, and at least two months rent.

Whether you lease the property furnished or unfurnished, schedule a pre-move-in walkthrough with the tenant and document the home's condition in writing and with photos. Never let a renter store belongings or move in prior to the beginning date on the lease. Require the tenant to carry renter's insurance, but don't cancel your owner's policy.

Setting Up the Logistics

Arrange for automatic transfer of funds from the tenant to your mortgage account if possible, or require direct deposit of the rental fee to your bank account. Designate someone who will act on your behalf in case of emergencies, or to take action in case of default, damage or a tenant's early departure. If you will be absent for several years, consider hiring a management agent or a company to handle the leasing process for you. Typical fees range between one and one and a half times the monthly rent, but having an agent will simplify the process of finding and qualifying subsequent tenants, and the agent will be responsible for advertising the vacancy, screening applicants and handling routine property maintenance.

Checks and Safeguards

Depending on how long you anticipate being away, it is wise to designate someone—perhaps a family member or trusted advisor—to visit with tenants on a periodic basis, either by phone or in person. It can be a friendly visit, rather than an inspection, but it will also serve as confirmation your home is being well-cared for, and its value is being maintained. As an alternative, make arrangements with a trusted, professional real estate agent to keep you informed about local sales, tracking home prices and market conditions during your absence.

For informational purposes only. Always consult with a qualified legal expert before proceeding with any real estate transaction.

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