Becoming a landlord sounds like a good idea at first because of the passive income factor. Investing in a property always comes with its risks, but there are also perks. Deciding that you want to buy a house and turn it into a rental property requires planning and preparation.
It’s not a good idea to wake up one day and move forward without considering the pros and cons. While being a landlord is appealing, it comes with a lot of responsibility. You want to do it right, or you may end up in the hole. See what to think about before becoming a landlord.
Finding the Right Property
Spend time finding the right investment property for your situation. Determine the perfect size, condition and location for you. Keep searching until you find a property that you know is the one. This will save you a lot of headaches down the road. Take into consideration your skills, background and how much you’re planning to invest to make it look presentable. Have your family walk through it and give you their opinion before signing on the dotted line. Go in with a list of deal breakers that you’ll refuse to budge on when you’re out looking.
Preparation of the House
After you’ve nailed down the right property and made the investment, you have to prepare the house for living. This is part of the puzzle you need to think about and factor in well ahead of time. If the house needs a lot of work then you’re going to have to work fast. You need the money, time and resources to get the home in prime condition for renting. Work with a qualified contractor if you don’t have the background to get the home turned around quickly and correctly.
Extra Costs
You’re going to need to budget for extra costs and maintenance items. A home is not cheap to upkeep, and it’s going to be on you if there are issues. Save up and be prepared to receive a call in the middle of the night for emergency work that needs to be done. Even though you’re not living there, other people are, and that means there will be wear and tear as well as additional happenings you can’t control. As long as you have the money and maintenance person ready to go, you shouldn’t have any problems.
Your Time
Your first mistake is thinking of this as a fun project that ends once you leave the property. In reality, owning an investment property home is now part of your life, and it’s your job to make sure it’s well-maintained. Consider the time you’ll be spending fixing, checking in on and dealing with the current tenants, in addition to your day job and family life. You never know when you’re going to get a call or have to run over to the place to check on an issue. Keep your calendar open and your cell phone near you at all times, should anything go wrong.
The Type of Tenants
Your number one priority should be to vet your tenants. It’s not enough to look at them and assume that because they seem nice that your home will be fine. Do a background check and go through the proper paperwork to make sure the tenants have a good track record. You’ll be kicking yourself later if you approve tenants who trash the place or are always late paying rent. This is an important step in the process of owning an investment property and one responsibility of being a landlord that you should take seriously.
Backup Plan
Worst case scenario, it doesn’t turn out the way you had hoped, and you decide to sell the property. Use a well-known seller like Otranto Real Estate Co to help you get the home off of your hands quickly. It’s better to be honest with yourself and move on the right way than to hold on and have regrets later. Always have a backup plan ready to go and an out for keeping your reputation intact and minimizing any damages. Never assume it’s all going to go as planned and fool yourself into thinking you’ll be fine without having an exit strategy.
That it’s A Commitment
Be honest with yourself about the kind of commitment owning an investment property is. While it’s a great way to bring in extra money, be truthful about how much time, money and resources you have available for the new adventure upfront. When you purchase the new property you’re making a commitment to yourself, your family and future tenants to uphold your end of the bargain and be an excellent landlord. Remind yourself that you’re about to own a piece of land and can’t wake up one day and say you no longer want to be involved.
Taxes, Insurance & Laws
Your taxes are going to be more complicated when you’re a landlord. This won’t be the year to DIY and hope for the best. You’ll want to factor in the reality of hiring a professional to help you complete your taxes. Also, understand the renters insurance and investment laws, so you’re not caught off guard by any situations along the way. Educate yourself on all you need to know ahead of time, so you don’t leave room for silly mistakes or for someone to take advantage of you along the way. Although it’s not the most exciting part about the job, it’s extremely important you’re well-informed of the laws before diving in.
Conclusion
These tips aren’t to deter you away from becoming a landlord. They’re outlined to help you make an informed decision and prepare you for the job ahead. Owning an investment property has the potential to make you money and it’s a big responsibility. You have to weigh your options and consider your current situation before committing to this opportunity. There’s a lot to deliberate, and you shouldn’t take the decision lightly. This is what to think about before becoming a landlord.
