It’s easy to think that being a landlord is the way to go in the real estate world. After all, you buy a home or apartment building, then rent to people to earn a regular monthly income. Easy, right?
Not entirely. While it may seem like the life of luxury when you’re the one forking over the money, there’s a lot more to being a landlord than meets the eye. Not only is there paperwork and technicalities, there are several other things that not everyone is cut out to do. Before investing in a rental property, consider the following to decide if you’re willing to put the time and effort into being a landlord.
- Great income doesn’t happen right away – Most of what you make from your renters is going to have to pay off the mortgage on the building itself. What you do have leftover will have to be put away for repairs. Landlords generally have a source of regular income besides what they get from their tenants, so if you think renting property is an easy way to “retire,” you’d better re-evaluate your goals.
- You will be in charge of the grunt work – Whether you do it yourself or hire someone to do it, any repairs and maintenance that need to be done will be your responsibility. Yes, you can provide tenants with plungers, Draino, and a tool set for minor repairs, but when things get rough, you’ll be the one called in to fix it. Plus, you’ll get blamed for what doesn’t get fixed. Be prepared to either get your hands dirty or have the local Mr. Fix-It on speed dial.
- Not all renters are created equal – For every great tenant you have, you’ll most have at least five bad ones. Be prepared for the worst. Renters who don’t pay on time or build up back rent are just the tip of the iceberg. When you take on a tenant, you take on their issues as well, and that includes their lifestyle, their hygiene habits, and their friends. Even when you set rules, there’s never a guarantee that your renters will follow them.
- Half the battle is the paperwork – In general, a landlord needs to have a good head for legal jargon and good deal of financial and organizational responsibility. There’s more to being a landlord than maintenance and rent collection. There’s insurance to worry about, leases, deposits, separate accounts for separate properties, budgets, taxes, and local ordinances. Not only will you have to sign forms to fall in line with all of these, you’ll have to have a general understanding of how they work, why they work, and what could happen if you or your tenants fail to observe certain local rules.
- You may have to be “hardcore” – A landlord can’t be a pushover. If you’re going to make this a business, you have to be willing to put your foot down and stick to your rules no matter what. Tenants will give you sob stories and excuses for late rent or not following the lease rules. Others may actually get angry. A good landlord knows when to let something slide, like a slightly late rent payment due to financial problems or a mishap with some kool-aid and the carpet. But the time will come when you have to decide if things have gone too far. Sometimes eviction will be your only course of action, no matter how much sympathy a tenant tries to garner.
It takes a lot of work to be a landlord, especially if you want to eventually make good money, develop a positive reputation, and avoid the “slum lord” label. Do your research and decide if it’s something you’re really cut out for before jumping into the real estate market as a landlord.