[Run Silent]

1) I hope that the house you are planning on renting out is paid for. If not, I don't typically recommend financing a rental property. If you are financing, then at bare minimum, don’t count on the rent from a tenant to cover the deficit in your budget if you can’t afford a mortgage.

2) The minute you rent out your home, it becomes an investment property. Investment properties come with state-specific insurance and lease agreements. You’ll need to understand the rules and regulations in your state regarding rental properties first.

3) Renters should be aware of your expectations upfront and understand the consequences of not abiding by those rules.

4) Ongoing upkeep and maintenance could be a chore. Renting out a home in theory sounds great—but throw in the cost of unexpected repairs on electrical panels, appliances or hot water heaters, and renting might not sound so appealing after all.

Regarding tips on securing quality tenants:

1) I check the place they used to live before. We pull a credit bureau on them. We get a huge deposit upfront—at least a month but usually two months’ rent in addition to the first month’s rent to be paid. We interview them. We talk to them. We want to see how they converse. They’ve got to be pretty good con artists to get past me now. You just spend more time screening your tenants and digging into what’s going on there.

2) I’ll tell you another trick I learned. Depending on the type of property you are and where the people live that are moving, you can drive by the place they live in now. I’d like to see what it looks like—how they’re maintaining it. If they’ve got a bunch of junk sitting in the front yard and the grass is grown up around the windows where they’re living now, I don’t want them in my house. That’s another indication of how good a care they’re going to take of your property. But more than anything, if you just do a good, strong interview with the tenant, dig in, and be sure you are pulling up the checks for previous rentals. Show me some proof of the actual payments being made on time.

3) The big thing is that people who are landlords are just like people that are employers. They don’t take enough time screening the relationship meaning that most people who do hiring don’t spend enough time doing the hiring. Most people that put tenants in their homes don’t spend enough time interviewing the tenant and digging into what’s going on there.


Overall, I think it is okay if done correctly, but I strongly recommend against having a tenant in a home with a mortgage. The same question reversed would sound like this: if you had your new house built and had the cash to pay for it without a mortgage, would you borrow on it to purchase a rental house in the neighborhood you live in now? The answer should be “no” because you don’t want debt. You should build wealth slowly and take the risk out of it.