What Makes a Good Landlord?
Are you cut out to be a landlord?
Becoming a successful landlord involves a little more than just having a property to rent out. While having a vacant home that could feasibly be rented out seems to be the main criteria, there are some other serious considerations that need to be made before taking the leap. This article will explore some of the main points to keep in mind when deciding to lease out that first property.
A successful landlord does not have to be a real estate tycoon or business mogul, though a working knowledge of basic business principles and local tenant laws is very helpful indeed. It is also important to understand that risks are involved and a landlord who can emotionally detach themselves from the property will fare better in the stress department. A few skills and attributes that potential landlords will need are:
· Ability to make maintenance repairs to the property. Those individuals who are less than handy in the handy-man department should establish a relationship with a reputable handy-man.
· General knowledge of local landlord tenant laws. A little research now can save a lot of headache later.
· Basic bookkeeping skills. Landlords will need to keep accurate records and receipts of rents and maintenance. It is always possible to hire an accountant or bookkeeper, but if this is the first rental property that may not financially be an option.
· Emotional detachment from the home and/ or tenant. It is extremely important to remember that this is a business relationship only. Owners who become too familiar with their tenant could make decisions on an emotional basis that may not be financially sound.
How to Be a Good Landlord
Help finding an Investment Property
Many first time landlords are made of necessity. Recent real estate trends, coupled with this economy, have left many homeowners unable to sell. Instead of defaulting on the property and going bankrupt, the natural choice is to rent out the home. Other investors will be searching for a rental property. While this seems easy enough, there are some guidelines that could be very helpful.
·Ensure that the property is in an area that provides access to employment opportunities. It would be quite difficult to rent out a property that is located outside of a reasonable commuting area.
·Research the school district in which the property is located. Renters often have families and will want to be in districts that are known for better schools.
·The best rentals are located close to shopping and entertainment. It is easier to fill a property that is accessible to amenities.
·Set a budget and stick to it. It is important to keep the mortgage low since the landlord must keep this paid even during periods of vacancy.
Expenses Associated with Rental Properties
There are expenses associated with being a landlord that many first timers neglect to budget for. In addition to the mortgage there will be taxes and insurance. Oftentimes taxes will be higher on investment property than for owner occupied units. Insurance can also run higher depending on the liability limits.
Maintenance and repairs can easily become a costly expense. The easiest way to mitigate these costs is to perform much of the work yourself. While major issues like plumbing or wiring should be left to the professionals, there are many mundane repairs that can be completed with a simple household tool kit and a little elbow grease.
For those prospective landlords that wish to keep personal involvement at a minimum there is always the option of hiring a property manager. These real estate professionals will handle everything for a fee, usually 10% of the rents each month. This option is fairly fire and forget and is especially helpful if the landlord is located out of state. Property managers will place tenants, collect rents, complete maintenance and keep records. Many will even pay the mortgage, taxes and insurance from the rents.
The main issue here is to thoroughly check property managers before signing a contract. Shop around and get references from other landlords. The right manager can make the whole process a dream while being tied into a contract with shady operators can make life very difficult.
Becoming a landlord is not for everyone. There is money to be made in rental properties, but there is also risk. One bad renter can cost a bundle in damages while great long-term tenants can make it very lucrative. From personal experience I can attest that being a landord, while a lot of work, is a very rewarding venture.
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