Consider that you may have to fix things. That's why some homeowners hire companies like North Bloomfield Properties to serve as landlord. Costs are usually around 10 percent of the monthly rent, give or take a few percentage points. Property management companies handle the tasks that some homeowners dread, like collecting rent and making repairs.
If you want to manage your property but aren't a handyman, you could purchase a home warranty that covers major repairs and appliances, suggests Carmen, who says his costs are about $400 annually.
"I've included in the lease a stipulation that any time we need to use the warranty, the lessees and I will split that deductible. It gives them a little skin in the game, so to speak," Carmen says. It's also a fairly common practice when renting single homes.
Set ground rules. Bruce Specter, a loan consultant, has owned multiple houses, first in Scottsdale, Ariz., and now Reno, Nev. He suggests limiting the amount of people who can live in your house – and their vehicles.
For example, he says a woman with children moved into one of his properties. "Next thing you know, the boyfriend moves in with his kids and his hobby of restoring junk cars. Next thing you know, we have an episode of 'The Brady Bunch' meets 'Sanford & Son,'" he says.
On the plus side, Specter says, when the tenants moved out, they left the place spotless. Many tenants won't, however, which is why security deposits are such a good idea. Morris says he visited a house he had rented after the tenants moved out and found a pig in one of the bedrooms, which was also full of straw, mud and pig droppings. "You've heard of a house being a pig sty? Well, this place literally was a pig sty," Morris says.
Make sure your homeowner's insurance covers your tenants. "The worst possible scenario is that someone is injured on your property and sues the landlord, and the insurance company denies coverage," says Richard Ernsberger, a Pittsburgh real estate attorney.
Be realistic. These days, few tenants will have perfect credit, and looking for someone with a score in the 700s may mean keeping your home empty for a long time.
Besides, "credit isn't the most important issue," Specter says. "It's the rental history and job stability."
And if someone waves a lot of cash in front of you, that's not always a good sign. "Still vet them," urges Specter, who has had two tenants offer six months' rent upfront in cash.
He turned both down, which may have been a good call. A tenant who only pays in cash may not have a bank account, which could mean he or she has money problems – or worse.
One of Malik's clients rented out a house out to a "nice family with little kids." The tenants turned out to be drug dealers, and always paid their rent in cash. "Mostly in $20 bills," Malik says. "It never occurred to her to be suspicious of this arrangement."