Primary to Rental

[Corey T.]

Good evening!

I have just accepted a job several states away and would like to convert my primary residence into an investment property. I have been reading all across these forums and google, but I wanted to post my "to do" & "unanswered question" list for our resident experts to analyze and let me know what critical step I'm missing.

1) Get landlord insurance instead of home insurance
2) Interview and find a good PM (Lynchburg, VA - anybody have a lead?)
3) Do I have to contact my bank? I'm assuming not as long as I personally am still paying the note.
4) Accumulated approximately $3k in "safety net" funds earmarked specifically for the house for vacancies/repairs. Will be added to on a monthly basis up to about $6k at which point I'll put more towards the mortgage. I don't need cash flow, I just want a paid off property in 15 years.
5) At this point I am not interested in setting up an LLC. I don't have major equity or assets at this point - good luck wringing a drop out of me now! I would set one up within 2-3 years though once I find a good attorney.
6) Would the PM handle lawn maintenance in their 10% cut? Or is that extra?
7) Do PM's send you monthly statements? How do you settle up on extra maintenance costs?

I appreciate the advice guys, thank you!

[Sharad M.]

1) Get landlord insurance instead of home insurance
Contact your insurance agent and they will be able to assist you with the right insurance product.

2) Interview and find a good PM (Lynchburg, VA - anybody have a lead?)
Yes, since you will be moving out of town, it is very important you hire a reliable property manager.

3) Do I have to contact my bank? I'm assuming not as long as I personally am still paying the note.
No

4) Accumulated approximately $3k in "safety net" funds earmarked specifically for the house for vacancies/repairs. Will be added to on a monthly basis up to about $6k at which point I'll put more towards the mortgage. I don't need cash flow, I just want a paid off property in 15 years.
That's a very smart idea. It's always great to have a reserve fund set up. How much reserve fund you need will depend on your rental income and mortgage payment. At a minimum, I would like to have at least 6 months worth of rental income or mortgage payment, whichever is higher.

5) At this point I am not interested in setting up an LLC. I don't have major equity or assets at this point - good luck wringing a drop out of me now! I would set one up within 2-3 years though once I find a good attorney.
IMO, I don't believe setting up an LLC is really necessary for you.

6) Would the PM handle lawn maintenance in their 10% cut? Or is that extra?
That's extra. At least it's extra in my area.

7) Do PM's send you monthly statements? How do you settle up on extra maintenance costs?
Usually, PM's will send you a monthly statement. As for maintenance costs, usually there is a clause in the agreement that PM's don't need to contact you to make a repair for upto a certain amount, anywhere from $50-$100. If the expense is under the set limit, the PMs will deduct the expense from the rental income and deposit the remainder in your bank account, if the repair is going to cost more than the preset limit, PM's will contact the owner and get approval for the repair cost. Since you will be out of town, you need to be extra careful in hiring a reliable PM company.

Not sure when you are moving out of town, but IMO it will be a good idea to attend a REIA or two in your area. There you can meet other landlords and inquire them about different PM companies. Make sure you ask for as many references as possible from the PM company and call each and every single reference and ask them about their experience. You specially want to speak with some owners who are in similar situation as yours where they are living out of state and have the PM manage their property.

Good luck!