Avoiding landlord land mines is possible with some homework

The rental market is so strong and growing a lot of property owners in the Manatee County area are getting into the landlord side of things for the first time -- including many homeowners who see the value in renting the house they have lived in for years.

The money just makes sense. And it can be a terrific way to build wealth over time -- or to lose your shirt, along with a fair bit of your sanity.

It only really makes sense when it is done right. There are a lot of land mines that can make renting properties a losing proposition and cause stress and heartache for the novice.

But if new -- or even experienced -- landlords follow some basic principles, they can successfully manage their properties.

First off, and this cannot be emphasized enough, if this is a family home you are choosing to lease, you have to set aside your emotional attachment. This is a business venture now and if you run it on emotions, chances are pretty good that it will not work out well financially.

Choose rental rates based on plenty of market research, not what your heart tells you. What are other rentals of comparable size and value in comparable neighborhoods going for? That is your price point, not what it is worth because of great family memories.

If you cannot detach yourself from the house but still want to rent it for prudent investment purposes, then probably a professional property manager is the best route.

Next, consider getting a P.O. Box and a separate phone number for the property. You don't necessarily want tenants to know where you live. Google Voice and Skype are two inexpensive ways to create a separate phone contact.

Consider creating a legal entity through which to rent it. Use a lawyer to draw it up appropriately for your situation and discuss with a tax accountant. This will provide you some liability protections and maximize your tax savings. If you do this, it should be done up front. Too many people think they can just do it later. But once you have leases and contracts in place, it can be difficult to accomplish and will cost more.

Perhaps the single most important element of the process is finding good tenants. What is your ideal tenant? Perhaps you want someone with no prior bankruptcies, evictions or criminal convictions and a FICO score in a reputable range. You may want non-smokers. Will you allow pets? If so, what kind and what size? And will that mean a larger deposit?

All of these questions should be decided up front, so potential tenants understand the rules exactly. Further, this will winnow undesirable tenants.

Make sure your tenant application paperwork is thorough, collecting all the information you will need to make an informed decision. Require solid references from previous landlords and current and previous employers. Be willing to make calls to those references to ensure you are getting who you think you are getting.

Allowing bad tenants into your rental property can make the landlord experience a nightmare. Vetting is critical and that means knowing what kind of tenant you want and how to make sure that is the kind you get.

If you diligently follow these guidelines, you can have a positive rental experience.

Andy Moore, founder and CEO of Gulf Coast Property Management, is also president-elect of the Sarasota/Bradenton Chapter of the National Association of Residential Property Managers.

This story was originally published December 29, 2015 at 6:00 PM with the headline "Avoiding landlord land mines is possible with some homework ."