Landlords have an average income of $97,000 per year. If you’ve been looking for ways to make more money without adding a lot more work to your life, becoming a landlord might be right for you.
It’s not as easy as it looks, however, and there are a few things you should know before you get started. We’re here to talk about them.
Read on to learn what you should know before becoming a landlord.
You Need the Funds to Get Started (But How Much?)
Becoming a landlord usually isn’t cheap. Some people are lucky enough to have homes or apartment buildings given to them or passed down through the family, but most landlords buy second (or third, or fourth) properties to use throughout their landlord careers.
Buying a second property is almost the same as buying your first property. You’re going to have to set aside money for things like your down payment, your realtor fees, taxes, and anything else that comes with purchasing a home.
You can make this as cheap or as expensive as you like.
Many first-time landlords want to buy cheap old houses that are in need of serious repair. They think that the money they save on the fixer-upper will be worthwhile.
This may be the case, but it depends on the property. It’s not uncommon for properties to need so much work that they end up either more expensive or almost as expensive as an equivalent house in good condition would have been.
You can also buy a turnkey property. This property is already ready to rent out and may or may not have a tenant in place. This is convenient for landlords who aren’t interested in doing as much behind-the-scenes work.
You’ll also need to budget for future expenses. So in short, make sure you have money in your savings account if you want to try being a landlord.
You Should Always Budget for Repairs
Speaking of future expenses, it’s always in your best interest to set aside money for repairs and maintenance.
Initial repairs will require a bit of money most of the time unless you’ve purchased a home in perfect condition. Even minor things, like painting the walls or replacing flooring, can be quite expensive.
You also need to budget for emergency repairs and routine maintenance. Emergency repairs are your responsibility. Not doing them can cost you tenants and get you into legal trouble.
Routine maintenance will help you avoid emergency repairs. When you make an effort to keep the property in good condition, you’ll improve its longevity.
Remember that you’re somewhat of a business owner when you’re working as a landlord. Some of your money has to go into upkeeping and improving your “business,” which in this case means keeping your property in great condition.
You Need to Stay Up to Date on Laws and Regulations
This is crucial. It’s very easy to make a mistake that will get you into legal trouble as a landlord. You must be familiar with all local and federal housing laws (as well as tax laws) if you want to be successful.
You can not discriminate against tenants. You have to write air-tight leases and follow them. After all, they’re contracts.
It’s in your best interest to work with someone who understands the law, at least at first. They’ll be able to guide you and ensure that you’re not making any serious mistakes that could land you in hot water.
Your Days Go Beyond 9 to 5
If you’re used to a standard 9 to 5 career, being a landlord will change that.
There are ways to be a hands-off landlord, but for newcomers, a lot of work is necessary. You’re going to be working at all hours unless you work together with a property management team (and sometimes even if you’re working with that team).
Remember that your tenants may have issues at any point throughout the day. As a matter of fact, if they work normal hours, their problems will likely occur early in the morning and late at night because that’s when they’re at home.
Your work/life balance will stabilize once you get into a rhythm with property investing, but be ready for a bit of a transition period. One of the benefits of being a landlord is that the work gets easy once you have a system in place.
You Should Screen Your Tenants
When you’re ready to start bringing in tenants for the first time, make sure you screen them before accepting their applications.
Most tenants will be reasonable. They want to treat your property like their own home because they want a nice place to live. As long as you’re good to them, they’ll be good to you.
Not all tenants are like this, however, so doing a quick screening process can make a big difference.
At the very least, make sure they have enough money to pay rent every month (whether it’s from income, student loans, or money coming from parents or the government), run a quick background check, and ask a few basic screening questions.
Even a low-effort screen will protect you from unpleasant tenants.
You Should Consider Hiring a Property Manager
So what does a landlord do? A lot of things! Again, being a landlord can be time-consuming, especially at first.
Hiring a property manager can help. A good property management team will take care of a lot of the behind-the-scenes work associated with being a landlord.
They can help with tenant placement, marketing, arranging maintenance, and so much more.
Are You Ready to Try Becoming a Landlord?
Becoming a landlord isn’t easy, but it can be incredibly rewarding for the right people. You can make a lot of money if you play your cards right, and you may be able to quit your full-time job (or at least choose a job that’s less stressful).
At Reedy & Company, we offer property management services that will make your life easier. Contact us to learn more and get started today.