How to list a rental property properly

The not so great secret in the housing markets with surplus inventory of homes for sale... turn sales listings into rental property until the market picks back up. Listing a home for rent and finding a tenant could be a great way to service customers that have not been able to sell, or need to move but fear they will not be able to sell. However, poor execution could cost you the customer you are trying to maintain and hurt your professional credibility. The following is meant as a guide, based on my own personal and professional experience, on the proper way to list a rental property. Please add comments if I miss something, so this can be as complete as possible.

OK, the first step - be realistic with your expectations if you are considering placing the rental listing yourself. I can not stress this one important fact enough. If you are not really interested in becoming a property manager, the best way to serve your customer may be to find them the best property manager in your area to serve them and their needs. A good customer that has chosen you as their agent has done so because they feel you are the best possible person to represent them. If this is not the case, for a rental listing, you may earn more respect from a customer by letting them know this and referring them to someone that will serve their needs, then by stretching yourself to areas of lesser expertise. Do some research, find out what your customer really needs (more on this below), then interview property managers to see which one is the best fit, that will partner with you and/or sign a formal agreement entitling you to the future sale or at least a referral from future sales.

Now, if you have decided that you want to be an agent that can do it all, including some property management, here are the steps you should take with your customer:

1. Find out what their tenant expectations are and help make them realistic if they are not. Most homeowners that are "turning to the rental market" are not experienced landlords, so they have unrealistic expectations. Many are expecting to find the "perfect tenant", with great income and credit with no pets, that will keep their property in tip top shape. They also expect a tenant that will happily move out at the end of the year if the market picks up, or stay longer if the market is still weak. Remind your customers that they are not alone in the rental market and they will be competing with others looking for tenants. They must be realistic and be open to accommodating needs of the tenant, especially if the tenant wants to lease for a longer period of time. Remember, tenants are people searching for a place to call home and many do not really want to look for a home and move every year. Also, some tenants have excellent credit and income and choose to rent instead of buying - these are usually the best tenants, so do not scare them away by demanding first, last and security, this is an insult to someone that has good income and credit.
2. Find out if your customer is really ready to be a landlord or what their property management expectations are. Tenant Placement is only a small part of what property manager does. Rent collection and property maintenance management are very real and possibly time consuming activities that your customer will need. Who will provide this service? If your customer chooses to do it on their own, will they be frustrated and blame you for finding them "the tenant that is causing all of these problems?" If the owner requires full service property management, their needs are beyond the scope of this article, you will need to become a professional property manager or help them hire one. Find the potential pitfalls and address them up front BEFORE you take the listing.
3. Research market value and list the rental for what it is worth, not what the owner needs. Most believe their are entitled to rent their property for enough money to cover their expenses (mortgage, taxes, insurance, etc.). While this may have been the case back in the days where everyone was putting 20% down or more to purchase a home, it certainly is not true now. The rental value of a home has nothing - repeat NOTHING - to do with the mortgage payment the owner is making. Find comparables on the MLS and the other advertising venues you will use to market the rental and use this for the basis of value. Use the market to help guide decisions on deposits, etc.
   
4. Have the customer sign a rental listing agreement. While this is "the contract" that entitles you to compensation, it is one of the easier steps in the process. This will be state specific, but make sure you clearly identify your compensation amount.
5. Advertise the property properly and follow real estate rules and regulations. Many states have strict advertising guideline for advertising real estate and those guidelines probably apply to rental property. There are many places to advertise rentals these days, both online and in print. Since most tenants prospects do not use real estate agents, do not forget to advertise often.
6. If you will be putting the listing in the MLS, be sure to provide complete information and offer fair or even motivating compensation. If you are not quite sure what fair is, work with a tenant to help them find a rental home. Take the time to show a few properties, call agents to find out pet policies, application fees and/or deposits because proper detail was not provided in the listing. You must have an appreciation for the work involved before you can associate a value.

1. Use an application the was written by a lawyer and collect an application fee per applicant. The application must meet certain criteria for you to pull credit.
   
2. Collect a deposit equal to at least half of the security deposit along with the application. Do not process an application for someone that is unwilling to place a deposit on the property.
3. Outsource the tenant screening... do not risk making a mistake when this service is readily available and the cost can be charged to the applicant.
4. Get the lease signed by the homeowner, your customer, first. You will be best served with multiple originals, one for every party.
5. Have the tenant conduct a move in inspection on a document you provide prior to moving in.
6. Collect all monies owed prior to occupancy - rent, security deposit, etc. - in the form of money orders or cashier checks only, no personal checks or cash.

Listing a rental property properly is not an easy task, it requires care and expertise just like a sales listing, be sure you are really prepared. This is not just a simple add on to a basic sales listing, where you put a rental listing in the MLS with the sales listing. That method only leads to dissatisfied customers and tarnished real estate relationships and reputations.