Becoming a Landlord
Do You Have What it Takes?
The soft housing market is turning homeowners into landlords in record numbers. Rather than wait for years to sell a home, more folks are opting to rent out their homes so they can downsize or move for employment opportunities. Some people become rental property investors to supplement retirement income, or to earn extra income while employed. For others, it is their sole source of income.
First-time landlords are often unprepared for the headaches and responsibilities that come with the job. Since forewarned is forearmed, here are a few questions to ask yourself before considering becoming a landlord:
Do you have adequate time? Owning rentals is a business, and you must be prepared to invest all the time it needs to make it successful. Landlords are at the beck and call of their tenants—not 24/7, but you should be prepared for late-night calls about plumbing problems or emergencies. You will also need to put in many hours preparing your property for renting, repairing previous tenant damages, and performing maintenance, plus handling paperwork, advertising, screening tenants, banking, dealing with insurance, and legalities.
Do you have people skills? Owning and managing rental property is a people business—you must have adequate management skills to be successful. If you don’t enjoy interacting with all kinds of people, dealing patiently with all kinds of problems, and hearing all kinds of excuses and stories, then you might not be as successful at landlording as you’d like to be.
Can you separate business decisions from your personal feelings? Being a landlord requires tough decision-making. You must follow laws, enforce rules, and treat every tenant exactly the same—no matter how their individual struggles tug at your heart. Establishing procedures is paramount to staying in control of your tenants—or they will soon be the ones in control. If your skills lie in other areas, you might think twice about becoming a landlord.
Do you have a financial safety net? Operating rental property is a costly business. While your rental income should cover your expenses and allow for a profit, you must be prepared for vacancies (with no income) and unexpected expenses. If anything can go wrong with your rental property, at some time—it probably will. Be prepared for the worst and made certain the business sustains itself, so you don’t tap into savings to keep things afloat.