Being a landlord is a lot more than receiving money in your bank account every month. I admit, I often fantasize about it, especially when I’m at work dreaming of being at home in my bed. How awesome would it be for other people to fund my life by paying their rent? While it’s a very real possibility, I understand that there’s more to being a landlord than simply getting a house and putting tenants in it. Here are things that one should consider before becoming a landlord.
1. Can you afford it?
Being a landlord comes with a lot of expenses. If you don’t have a good store of cash, it’s not an endeavor you should try. Possible expenses include:
- City inspections and repairs to bring your property to your city’s standards
- Marketing to get tenants for your property
- Unexpected repairs
- Holding costs if the property become unoccupied (mortgage, utilities, other bills)
- Legal costs
Ideally, the rent a tenant pays will cover the costs of maintaining the property, but you will need to have your own money to get and keep things going.
2. Do you have the temperament?
Being a landlord means you are taking responsibility for somebody else’s living conditions. It also means dealing with people in all their varieties. Can you handle late night calls about the furnace not working, or settle arguments between tenants? Are you ready to deal with both pleasant and difficult personalities? Do you have the toughness needed to move forward with eviction procedures for tenants that can’t pay? You have a few options: either hire a property management company, or be prepared to deal with the different stress factors that will inevitably come.
3. Is it worth the investment?
The whole point of being a landlord is to make money. So before becoming one, you need to get out your calculator and do some planning. What do people pay for rent in the area you plan to have a property? What is the health of the rental market? Does the area have more buyers or renters? What kind of properties attract tenants quickly?
Being a landlord is no easy feat, but people are doing it every day with success. With proper planning, you can be one of them. It’s definitely one of my long-term goals, and when I do become a landlord, I plan to have a property management company handle as much of the stress for me as possible.