Many people dream of becoming a landlord, owning several investment properties, each of which provides financial security as tenants cover the expense of the mortgage(s) and then some. However, in today’s real estate market, the promise of profit can sometimes be elusive if you don’t pay attention to some fundamentals.
In. most cases, it is advisable to work with a property management company, who can guide you in the decisions that always go along with becoming a landlord. We will attempt to cover several of those here.
- One does not simply pull a number out of thin air when determining what the rent should be on a given property. Properly assigning rent value is accomplished by determining the actual rental market value of your property. It is common to experience rents that are LESS than enough to cover a mortgage and expenses. Before becoming a landlord, you will want to make sure that it makes financial sense to do so.
2. You will need to set up (and maintain) an expense account to cover things like maintenance, management fees, and the occasional repairs that will need to be made. The older your house, the more you should budget for your expense account. Many of these expenses can be quite expensive, and as a landlord, you cannot afford to be unable to afford them. If the heater goes out in the middle of winter, you are obligated to replace it post-haste.
3. Finding the right tenant is an art form… and best left to the professionals. You might think that by becoming a landlord, you’ll have instant access to a ready pool of tenants (ie. family), but in fact… that rarely ever works out well. The greater the level of informality, the more likely you are to experience short or late payments, and many more tenant requests for repairs and/or upgrades. A professional property manager knows how to screen for the right candidates, especially zeroing in on those who will care for the property and pay on time, every time.
4. On the topic of payments, it becomes necessary to consider what happens if/when your tenant fails to pay, or pays late. In some cases, eviction may be the proper course of action. However, eviction is not as simple and straightforward as asking your tenant to leave. There are many laws in place that must be rigidly adhered to. In the event that you have to take your tenant to court - you are responsible for all the attorney fees and court costs. This is another great time to have a professional property manager on your side.
5. Another wake up call to becoming a landlord comes when you realize that between tenants, you are not bringing in any money, but you are still required to cover all of the expenses of maintaining your home. If tenants damage your property, or you haven’t properly maintained it, you will have extra expenses to bring it back into proper condition for rental. Every day that your home is empty, it’s an expense that must be accounted for.
These are just the tip of the iceberg for those considering becoming a landlord. It’s been stated several times that there’s genuine value in establishing a relationship with a professional property manager. We stand ready to advise and assist you, should you desire our assistance. Contact us today, and let’s discuss your needs.
