New property in Smyrna, DE I have questions about self managing

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New property in Smyrna, DE I have questions about self managing

Justin Demko
Member since 2019 · 4 posts · 1 vote

I am finishing a remodel on a house in Smyrna, DE and is it almost ready for a tenant. I have no experience in real estate beyond being a home owner who has done a remodel that I have now moved out of and want to rent the house out. I want to self manage this property. I plan to buy the bigger pockets Delaware landlord forms. I have a prospective tenant who I plan to run through the smart move app. I have some questions please see below.

-Do I need a rental property application? What are the benefits of taking the time to create one, or can I handle all the details verbally and reflect what is discussed on the lease agreement? I can see it being helpful after a few of these but this is going to be my only property for at least the next 6 months to a year.

-Should I tenant screen for all adults in the house or only those responsible for paying the lease as agreed?

-What kind of questions am I permitted to ask previous landlords and employers?

-How does the lease get finalized? Do I just put all the paperwork on dotloop/docusign and send the digital copy to a lawyer to get it official?

-What is the purpose of mandating renters insurance?

-Do I legally have to hold the security deposit in escrow? Can I just keep it in a separate saving account? If I do need to do it in escrow who do I need to deal with to make that happen is that a local bank or lawyer? Are these rules specific for Wilmington, DE and the surrounding area or is this standard?

Thank you,

Justin Demko

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y

@Justin Demko we can answer your questions for you but there are another 1,457 questions that you failed to ask. You may want to consider hiring a property manager until you've gained some knowledge and experience. Nothing will destroy your rental investment plans faster than the wrong tenant or a simple legal mistake.

If you insist, you need to read some books on how to manage a rental. My personal favorite is "Every Landlord's Legal Guide" by NOLO. It includes some of the most common forms you'll need and they can be edited. BiggerPockets also has a book about managing that is highly recommended.

You need to know your state laws inside and out. You need to know how to accept applications and screen tenants. This is probably the single most important step. You need to learn how to determine market value, how to advertise, how to pre-screen and screen, how to protect against predator tenants, how to deal with late rent or unauthorized tenants or pets, what you need to know about lead paint or mold or ice dams or furnaces or pet urine on the lawn...

If everything goes right, you rent the place one day after advertising, a little old lady moves in, and she pays rent without fail for 30 years at market rates and you walk away a winner.

The more likely scenario is that you'll enroll in the school of hard knocks and be beaten back and forth many times before getting it right, losing thousands or tens of thousands in the process. There are a lot of smart people out there that lost a lot of money along the way and dealt with a lot of stress. Many more have walked away from investing completely.

I'm just saying you should consider hiring a professional and doing it right from the start. It wills save you a lot of time, money, and trouble.

The DIY Landlord Book4.7247 Reviews
WebsiteView Page
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  • Cassandra Sifford
    Rental Property Investor · New Castle, DE · Member since 2016 · 376 posts · 158 votes
    7y

    Hi @Justin Demko ... I'm a new investor so I can only speak to what I have learned along the way and found online.  Your questions are good and I hope someone with more experience responds to educate us both :)

    - I'd say yes you do need a rental application.  You want to make sure that you have all the details of the potential tenant so you can screen them fully.  You'll want to do it right the first time and be consistent with the way you wish to run your business.

    - Screen for all adults who will be on the lease.  You may not want anyone with felonies in your unit, but the tenant may have someone living there who does.

    - In regards to verifying employment, I found this online:

    * Can you confirm that [tenant’s name] has worked for you since [date of employment]?

    * What does he or she do for the company?

    * Can you verify that he or she makes [salary amount]?

    * Is [he or she] a responsible employee?

    If you are following up with previous employers, you can ask why he or she left the job. 

    - In regards to asking questions of a previous landlord, I found this on Zillow:

    * Did the tenant pay their rent on time and in full?

    * Did the tenant take good care of the home or property?

    * Was the tenant a courteous neighbor?

    * Was the renter a good communicator?

    * Would you rent to this person again?

    - As far as requiring renters insurance, it mitigates the threat of a lawsuit.  The tenant may try to make a claim to make you responsible for some of the damages.

    - (Per https://www.lscd.com/node/299/security-deposits-an...)  We as landlords must place the security deposit in an escrow bank account in a federally-insured banking institution located in DE.  If requested by the tenant, we must disclose to the tenant the location of the security deposit account. If the landlord fails to disclose the location of the security deposit account within 20 days of a written request by the tenant, then the landlord loses the right to hold the security deposit and must refund it to the tenant within 20 days. The landlord also loses the right to hold the security deposit if the landlord fails to deposit the security deposit in a federally-insured financial institution located in Delaware. The tenant is entitled to double the amount of the security deposit if the landlord fails to return the full security deposit to the tenant within 20 days of forfeiture. 

    I tell you the internet is a marvelous thing LOL  If I can't get the answer here on BP, I tend to Google my question and see what comes up.  Thank you for the questions as my property is just about done so I'll be needing this information as well.

    Well wishes ... Cassandra :)

    2Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    @Justin Demko we can answer your questions for you but there are another 1,457 questions that you failed to ask. You may want to consider hiring a property manager until you've gained some knowledge and experience. Nothing will destroy your rental investment plans faster than the wrong tenant or a simple legal mistake.

    If you insist, you need to read some books on how to manage a rental. My personal favorite is "Every Landlord's Legal Guide" by NOLO. It includes some of the most common forms you'll need and they can be edited. BiggerPockets also has a book about managing that is highly recommended.

    You need to know your state laws inside and out. You need to know how to accept applications and screen tenants. This is probably the single most important step. You need to learn how to determine market value, how to advertise, how to pre-screen and screen, how to protect against predator tenants, how to deal with late rent or unauthorized tenants or pets, what you need to know about lead paint or mold or ice dams or furnaces or pet urine on the lawn...

    If everything goes right, you rent the place one day after advertising, a little old lady moves in, and she pays rent without fail for 30 years at market rates and you walk away a winner.

    The more likely scenario is that you'll enroll in the school of hard knocks and be beaten back and forth many times before getting it right, losing thousands or tens of thousands in the process. There are a lot of smart people out there that lost a lot of money along the way and dealt with a lot of stress. Many more have walked away from investing completely.

    I'm just saying you should consider hiring a professional and doing it right from the start. It wills save you a lot of time, money, and trouble.

    The DIY Landlord Book4.7247 Reviews
    WebsiteView Page
    4Reply
  • Justin Demko
    OP
    Member since 2019 · 4 posts · 1 vote
    7y

    @Nathan Gesner

    Thank you for your feedback. My original plan was to have management but the property management fees of first months rent plus 10% monthly has really turned me off of the idea of subcontracting that service out. This property was not initially purchased to be a rental so the cash flow numbers are only positive if I am acting as both landlord and property manager. I plan to look at that legal guide you suggested as well that looks like a great resource. 

    @Cassandra Sifford

    Thank you for your feedback these answers are very helpful.

    0Reply
  • George Blower
    Retirement Accounts Attorney · Southfield, MI · Member since 2017 · 3k+ posts · 1k+ votes
    7y

    @Justin Demko

    Welcome to BP!

    1Reply
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