Even as housing markets in the U.S. begin to recover, there are still many vacant and foreclosed houses and buildings that are up for sale. If you’re an investor who is lucky enough to have a bit of extra cash, it might seem like the perfect time to diversify your portfolio by buying a property with the intention of renting it out to tenants. But it’s important to remember that becoming a landlord isn’t the same as investing your capital in the stock market. Any new property investor should decide if they are truly ready to be a landlord before even beginning the hunt for the perfect investment property.
Tenants
Even if you run a business with a thousand employees, you still may not be prepared for the type of “people skills” you need to deal with tenants.
Before collecting your first rent check, you’re going to have to go out and actually find tenants for your property. Do you know where to look for the best tenants? Are you familiar with online listing sites and how to get tenants to find your property? These are all important things to investigate if you are going to be a landlord.
Once you get tenants to your property, do you know how to sell it to them? Do you have a plan for screening your tenants? Nearly every landlord will run a credit check before signing a lease for a new tenant, but these days many are going a step further and running criminal background checks before any deals are made. You should seriously consider how you are going to ensure that you have trustworthy tenants who will not only pay the rent on time, but will treat their neighbors, your property, and you with the proper respect. Rocket Lease is one such company that gives landlords free online rental applications.
Repairs
Depending on how long a property has been vacant, you may find yourself purchasing a building that is already in desperate need of repairs. While you should certainly be prepared to deal with the renovations necessary to get the property in rentable shape, do you have a game plan for repairs that will be needed once tenants move in? Even gentle and respectful tenants can cause damage and any property will eventually show wear and tear. As a landlord, will you save a few bucks by attempting repairs yourself, if you’re skilled enough to do so? Will you balk at hiring professionals — plumbers, roofers, gardeners — when necessary? Think about how you will handle these types of situations before you jump into the landlord game.
Availability
Simply put, being a landlord is not a hands off investment. Even if you go the extra mile to hire a property manager to deal with the day to day management of the property, there will still be times when you need to be available. Are you ready to get phone calls in the middle of the night about an emergency roof leak? Will you be willing to drive across town in your slippers to fix a blown fuse or a defective water heater? Even if you purchase a piece of property across the country, you will still find yourself “dealing” with things on a regular basis. No matter what the return on your investment, you may just prefer an investment that you don’t have to worry about.
The Law
As a landlord, there are a whole host of laws that you should be familiar with before your first tenant sets foot on your property. You may think it’s enough to look things up as you go along, but a single misstep could end up costing you a lot in legal costs down the road. While you don’t need to be an attorney to be a successful investor, you should certainly give yourself a crash course in your state’s landlord/tenant laws before jumping into your investment.
Being a landlord can have its rewards, both financial and personal. But it’s important that you not consider it a “get it and forget it” investment that will not need your input or attention once you have a tenant settled. Property investment can be a great way to diversify your portfolio, but it is not a decision you should come to before determining if you are really ready to be a landlord.
This is a guest post by Carlos Quimbo from Rocket Lease. Rocket Lease provides free online rental applications for landlords to screen tenants for their rental properties.
