After finally saving up enough money to use as a down payment, I decided that it was time to hit the market. I met with a lender, got pre-approved for a loan, and then started visiting different properties. However, I quickly realized that I didn't know as much about real estate as I would have hoped. I wanted to find a great neighborhood and know what to ask the professionals, but I could tell that I needed a little help. To point me in the right direction, I started working with a great real estate agent who was familiar with the area. This blog is all about educating the general public on real estate matters.
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Many people looking to secure a more confident retirement plan look at rental properties as a stream of income. And, to be sure, this can be a lucrative and relatively stable way to ensure that money comes in monthly. But just because you can buy one or more rental homes doesn't necessarily mean you should do so. How can you tell if being a landlord is the right move for you?
Here are 5 ways to know if you should dive into the rental business.
You have spare time. Many landlords underestimate the amount of time they will spend dealing with tenants, repair work, evictions, legal and tax matters, documentation and travel. Trying to squeeze in time to manage rental homes -- especially multi-family homes -- while working full- or part-time may lead to early burnout. So be sure you have enough spare time to spend up to 20 hours a week handling details of your rentals. If not, hiring a property manager can help, but this will eat into your profits.
You have spare cash. Like any business, rentals can require significant amounts of working capital to keep things running. So don't sink all your funds into the purchase without having enough to keep it going through good times and bad. If you're not sure about whether you have enough liquid cash, start with smaller rentals, such as single-family homes or a duplex.
You like fix-it jobs. Think about the small home improvement or maintenance projects you have at home, then multiply this times the number of units in your rentals. If this idea makes you groan, being a landlord may not be your ideal job. Most landlords keep costs manageable by taking on some of the work themselves, so make sure this is something you actually enjoy.
You can handle difficult people. Having tenants and owning buildings makes it almost impossible not to occasionally be forced to deal with difficult conversations, confrontations and red tape. Tenants may make demands, fail to pay rent or even fight eviction, so be sure you are the kind of person who can handle such situations in a way that will keep bad things from becoming worse.
You're diversified. Putting all your retirement eggs in one basket can be a recipe for disaster. If your property loses value, you fail to keep tenants or you suffer uninsured losses, all your assets could go up in smoke. So, before committing to rentals, be sure you have some other sources of income and other investments to balance out this one large holding.
By taking a good look at your personality and financial big picture, you can make a confident and knowledgeable choice about becoming a landlord. And whether you determine that it's the best thing for you or something to skip, you will surely find that it's a smart decision.
If you decide that being a landlord is right for you, contact a company like Prime Realty today to start acquiring your first rental property!
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