So you want to be a landlord?
Do you ever ask yourself ‘Wouldn’t it be nice to own some rental properties, sit back, relax and let the income roll in?’ Although owning investment properties can produce a lot of income, there is a lot to think about before jumping into a Landlord role. It’s important to do your research, find friends or colleagues who have investment properties, even speak with an accountant and tax adviser, to learn more about the risks and rewards.
Here are a few things to consider:
Do you have extra time, money, and energy to invest in purchasing and managing a property, as well as reserves in the bank for emergencies, repairs, etc.?
Are you familiar with a toolbox and have experience working with your hands? Do you know how to repair drywall, unclog a toilet or repair a broken sink? If not, you’ll need to hire professionals to take care of these types of things, which will eat into profits.
Do you have a lot of debt? When just starting to venture into investment property management, it may be best to wait until you have most, if not all of your debts paid off. Because owning investment properties is a commitment, not just of time and energy, but of money, you don’t want to go into it with little or no cash to use for the unexpected little, or big, things that will come up.
Do you have the down payment? It’s important to know that investment properties require a larger down payment than an owner-occupied property.
Because of the risk, interest rates for purchasing an investment property are typically higher than that of a primary residence purchase. It’s important to be sure you have a mortgage payment low enough so that it doesn’t eat too much into your monthly profits.
Operating expenses will typically run between 35% and 80% of your gross operating income.
What is your return on investment? You will need to consider the monthly mortgage payment, insurance, HOA dues, anticipated maintenance and upkeep on the property, etc., into your monthly expenses for the property.
Think about the type of rental property you want to purchase. Generally speaking, the more expensive the home, the more ongoing expenses will be.
Location, location, location! Just like home buyers, renters are also looking for a home in a good neighborhood, low crime rates, good schools, convenient to parks, shopping, etc. It’s always best to look for a property that will be appealing to the masses and will attract good tenants and top rental dollars.
TL;DR, don’t go into this venture blindly. It’s important to be realistic and do the necessary research. Although owning investment properties can be very rewarding and produce a lot of income, it’s important to know what you’re getting yourself into before taking the leap. Schedule an appointment with me by clicking here to talk about your plans and options.