18/06/2019
Do you want to be a landlord?
Propertyguru eNewsletter
Some people may think that being a landlord is fun – one would simply buy a property, rent it out and collect the checks all month. However, being a landlord is hard and time-consuming. It can also be very stressful and disastrous to your finances if you are not prudent with your endeavours.
But while it has its challenges, being a landlord can be financially rewarding. With smart choices and hard work, anyone can retire with various properties that provide a healthy income stream.
Here are some points to ponder to determine if being a landlord is suitable for you.
Acquiring a property
To be a successful real estate owner, one should purchase decent quality, cash-flow positive properties situated in fair credit quality and low vacancy areas.
Seasoned investors know that acquiring a good property requires a lot of work. In fact, around 75 percent of real estate investors do not earn much on their acquisitions. Renovations gone astray, bad tenants and poor cash flow issues can make an owner wish that he had just left his money in the bank.
So if you think you are willing to spend the next six to 12 months touring open houses, pencilling out real estate deals, learning about property management, making offers on properties and going through escrow and due diligence, then being a landlord might just be right for you.
Managing the property
Managing a property can be a real challenge. As a landlord, you should be ready to face potential issues like overflowing toilets, floods, and broken appliances. On top of that, you also have to hire maintenance people and contractors, record all rent, advertise and lease the property as well as pay bills and file taxes.
Being a landlord is a business
You should only buy a property that makes sense from a business perspective, and not because you want to live there. This implies that the property must be reasonably priced, one that would appeal to the kind of tenants you want.
Location is key
An old joke is that the three keys to a successful business are “location, location, location.” That is particularly true for rental property. A house may be priced lower because it is located in a neighbourhood with high crime rate or poor school. Hence, investing in areas you are unfamiliar with pose great risk, while acquiring properties in familiar areas or one you have fully researched is a smart move.
Determine the right rent
Rents vary. Local real estate agents can provide you with an idea on how much they are on the area you are buying a property.
Once you know this, you need to determine if it is enough to cover your costs. These include your loan, taxes and insurance. You should also have a budget for maintenance. Notably, one should have some money in the bank to cover for unexpected expenses.
Seek professional help
Consulting a real estate agent may help you get a solid lease as well as learn the rights of tenants. You may also want to hire an accountant and know some good electricians, plumbers and other tradespeople.
Make your tenants happy
Finding and keeping good tenants is the heart of a successful investment in real estate.
Of all the costs associated with being a landlord, the biggest one is vacancy. Every time a tenant moves out, you’re going to spend money, probably quite a bit of it. Hence, keeping your tenants happy is critical to your business and the way you keep them happy is by keeping the property in good shape and treating them with respect.
