Being a landlord is no easy task, no matter how many articles you find about the allure of passive income. Sometimes it’s impossible to fill a vacant property, sometimes a tenant is a nightmare and your state laws make it tough to evict them, and sometimes you get stuck with a lemon of a property that you’re constantly fixing. However, when landlording is done right, it really is the American dream come true. But is it your American dream?
Becoming a landlord requires a huge investment and a lot of risk. It’s not something to jump into lightly, unlike other entrepreneurial pursuits such as blogging that has little required investment (beyond your time, of course). If you’ve been thinking about becoming a landlord, check to see if you share commonalities with successful landlords. If you do, it might just be the match you’ve been searching for.
1. You have cash to spare
Few people fall into this category, and “to spare” is certainly subjective. Of course you can finance an investment property, especially since the cost of housing is still relatively low. However, always keep the worst case scenario in mind. What if you can’t rent the property? If you’ll struggle with the mortgage, taxes and repairs, you’re not financially ready (yet) to be a landlord.
2. You have a support network
Being a landlord sounds like you’ll have a lot of freedom, but you’re legally responsible to care for your property and watch over the tenants’ well-being. This means being on call nights, weekends and holidays in case of an emergency. However, if you have the right support network, which should include a property manager, you can delegate those tasks. Go it alone and you’re asking for trouble.
3. You know what people want
Why do some properties rent more easily and faster than others? There are certain styles and trends which are more in demand, as well as the issue of school districts, neighborhood, public transportation and the like. Knowing what renters in your area want is key to success. You either have it or you don’t, and it’s largely skill/research with an eye for design.
4. You’ve rented before
Just like anything else in life, if you’ve been on both ends of a deal, you have a better perspective on things. If you’ve rented recently, you already have an innate grasp on the rental market and what renters want from a landlord. Maybe it’s the possibility to make rental payments online, the desire for more kitchen space or a more pet-friendly apartment.
5. You’re a realist
In an idea world, your renters would be silent, always pay on time, and not make a single scratch in your property. That’s not realistic. If you’re prone to micro managing or don’t believe in “normal wear and tear,” being a landlord will just stress you out.