Q: My husband and I are Germans and own a house in Fairfax County, Virginia. As we will have to go back to Germany for a few years starting this summer, we are planning to rent out our house. We have some questions about the lease.
Our house is on a half-acre lot, with a swimming pool, hot tub, and a septic tank (which will be emptied this summer).
Should we have the landscape and the swimming pool maintained by companies instead of leaving it to the renter? The cost for these services is quite high and in addition to the local real estate taxes, we may not get it back because of the rent we’re able to get.
If we decide to leave the maintenance to the renter, what kind of rules or regulations would you recommend to put into the contract? Is there perhaps a model form of a contract we could use?
We have a lawn mower. Should we leave it here and rent it out with the house or sell it? Should we talk about the septic tank in the lease? Should we leave instructions for how to use a septic tank?
If there is damage caused by the tenants, how should we deal with it?
A close friend of ours is a real estate agent and will take care of the leasing process as well as of the property as our property manager. We know there are special property management companies on the market. How are the usual costs calculated for such a service?
We know these are a lot of questions but hope all the same you will be able to help us with some advices. With the plan of leasing a house in the USA we feel like getting into "unknown and adventurous waters". Thank you very much in advance.
A: Let’s start at top. First, long-distance rentals are often problematic. You’re going to be living in Germany, thousands of miles away from your home in Fairfax County, Virginia. There are a lot of expensive problems that can happen when you live so far away from a rental property.
I wouldn’t normally recommend keeping a long-distance rental for an unlimited period of time, because you’re not going to be there to check up on it. But it sounds as though you’re preparing as well as you can for this endeavor. I have a few suggestions that might help.
First, you need an agreement with your friend, the real estate agent, who will be acting as the property manager. The agreement should detail how much the friend will be paid, and what services he or she will provide.
Will she check on the property weekly or month? Will she send you digital photos or video of the exterior and interior of the property? Will she run ads, find tenants, screen them and do a credit and background check? Will she collect rent checks and deposit them for you or will the tenant deposit them?
More importantly, what happens if something happens to your friend and she is unable to fulfill her end of the bargain? (While you may still be friends, she could get sick, move, or leave the business.) Or, what if she’s taking your money but not doing a good job? What mechanism do you have for firing her and finding another property manager?
Next, you need to work with a real estate attorney to draw up a lease that addresses your specific issues, such as landscape care, pool/hot tub use and insurance, and rules regarding the septic tank. It sounds as if your home is a more expensive home and many off-the-shelf leases may not address your specific issues or protections for you in case problems arise.
Even the landscape is a big issue. While your grass can grow back, a poorly maintained lawn can cost thousands to repair. Pools, hot tubs, and septic systems are expensive to build, fix and maintain. If you leave maintenance to the tenant, and the tenant doesn’t do it, you could wind up with a big problem that could cost you tens of thousands of dollars to fix. If you have a security deposit with the lease, that security deposit may not be enough to cover the damage to the home.
So, write up a long list of rules for the pool and septic system. But I’d pay to have the septic system checked twice a year (or more often), and have the pool serviced so you don’t have a bigger issue with these items down the road. Your property manager can then check in weekly with the pool company to make sure the property is in good hands. The lease document could provide that the tenant must use companies approved by you to maintain these items and that the tenant must provide you with proof that the work is done on schedule.
Most municipalities have specific rules for landlords and tenants. But you really should work with a local real estate attorney who can help you put together a lease that works for you as well as an agreement with your property manager.
April 10, 2008.