First time landlord advice.

[Derek Markowicz]

Hi, I am moving out of my main residence (single family home) and plan on renting the property out. I have found prospective tenants and doing my screening process (thanks to the advice I have received from the forms). The question I have now is about all the behind the scenes things I would need to do like... 1. Do I need to change my insurance policy? 2. Should I open a separate bank account for all rental income and expenses that will occur? 2a. Do I then pay my mortgage from that account? 3. Where should I keep their security deposit? 4. Lawn care, is it the tenants responsibility? What if they don't take care of it, as I would like? 5. What else am I forgetting? Thank you in advance for all of your thoughts and advice.

[Marcia Maynard]

1. Join your local rental association (Illinois Rental Property Owners Association and affiliates). They may offer classes for beginners (Landlording 101). They will also keep you abreast of laws that affect you. Find someone there who can be your local mentor.

2. Invest in a few good books about landlording. Many recommendations from other landlords can be found here on BP.

3. Listen to BP podcasts about landlording; there are a few, including mine :-)

4. Create a mission statement and establish a management style that suits you.

5. Rental Agreement - Whether you decide to go with a Month-to-Month agreement or long-term lease, make sure it's a good one. We prefer MTM.

6. Insurance - Talk to your insurance broker. If the home isn't owner occupied, there's more risk to the insurer, so they need to know. They will typically require a landlord policy or fire policy, the name depends on the insurer. Also, require your tenants to have renter's insurance.

7. Banking - Establish a separate bank account for your rental property business. We find it best to have a checking account (for operations), savings account (for capital expenses), and a money market account (to keep security deposits). Mortgage payments are an operations expense. 

8. Taxes - At tax time you will be filing a Schedule E, so simplify your bookkeeping by using categories that match well with that form. This would be a good time to talk with a qualified tax professional, well versed in working with landlords and rental properties. Prepare strategies now for tax savings later.

9. Lawn Care - It's up to you. Whatever you decide, make sure the terms are clear in your rental agreement. Here's what's in ours:

LANDSCAPING/YARD CARE. Regular landscaping/yard care (mowing, edging, trimming, fertilizer, weed control) will be provided by ____(check one)____ [   ] Landlord  [   ]  Tenant .

For all Tenants:

a.Tenant agrees to keep yards, walkways, patios and decks clear and to keep premises free of junk and debris.

b.Tenant accepts liability for all landscape damage and/or replacement of such, if caused by neglect, abuse or lack of water.

c.Tenant may plant the beds adjacent to their dwelling to their liking, but only with those plants that are of appropriate size and type for the beds.All plants brought or caused to be brought to the property by Tenant will be cared for by Tenant.

d.Tenant agrees not to cut or prune trees, hedges and shrubs.This will be Landlord’s responsibility.

e.Tenant agrees to properly dispose of all plant debris and agrees to not leave such on the property.

f.Landlord will consider special Tenant requests for planting and removal of plants, shrubbery and trees, but reserves the right to determine the make-up of the landscaping.

g.Tenant agrees not to grow marijuana on the premises, indoors or outdoors.

For Tenants of single family homes only:

a.Tenant agrees to mow, water, and keep the grass, lawn, flowers and shrubbery thereon in good order and condition, applying fertilizers and weed retardant as needed.

b.If Tenant fails to keep the landscaping in good order and to follow these guidelines, Landlord reserves the right to hire a landscaping service at Tenant’s expense (after a 10-day notice to perform covenant).

c.Landlord reserves the right to restore the landscaping to its initial condition, as it was at the time Tenant began occupancy, or if improved during Tenant’s occupancy, to the level of such improvement. Restoration will be at Tenant’s expense.