With rents constantly raising, today is a great time to become a landlord. Especially with property values also going up steadily. Rental properties are among the best investments that you can make. However, how to be a landlord is not as passive of an income as some people think.
The best approach to how to be a landlord is maintaining a property that attracts desirable tenants that stay long term and pay the rent on time. Being a landlord means that you are the owner of the property and responsible for the maintenance and repairs. You’ll either have to do it yourself or pay others for it out of your cash flow from the property.
Beginning to Learn How to be a Landlord
Before buying a rental property, be sure to do the due diligence by analyzing potential tenants. The best place to own rental property is usually in neighborhoods that dominantly have owner occupied homes. You want a property in a neighborhood with a low vacancy rate. High vacancy rates mean that tenants are staying until being evicted and often do a lot of damage to the property out of anger before moving on to coach surfing with friends and neighbors.
How to be a landlord means knowing how to deal with evictions. Formal evictions result in a court judgment. Where you want to start is by screening potential tenant’s court records. If he or she has previously been evicted, you should assume they will fall behind paying rent to you.
One strategy that some landlords use is to charge a high deposit and a high rent for high-risk tenants. I don’t favor this strategy but it can be profitable. I prefer stable tenants in higher quality neighborhoods.
How to be a Landlord is About Due Diligence
Every real estate investment involves due diligence. It’s especially true for commercial properties which are what a rental or even rehab and flip are. These are all commercial deals even if they involve single-family homes.
Some people come to landlording expecting that all they need to do is collect the rent and pay the mortgage. But the reality is that the landlord has a lot of work to do. Preparing the property for occupation can be costly and properly screening prospective tenants can be very time-consuming.
The way I work is by trying to place respectable and dependable tenants in properties. Those that stay long term. Those that at least do some of the maintenance to the house they live in. When you do it this way, you have lower landlord costs and a higher profit.
What is enough due diligence is up to each landlord but background checks should include a comprehensive credit report, eviction reports, criminal reports, and a prequalification estimate based on the landlord’s desired criteria.
When First Learning How to be a Landlord
One of the first things you want to examine is the expenses that come with your investment property. Two of the most common things to look for are potential rental property taxes and homeowner association fees (HOA). These aren’t common but they do exist in some states or at some county levels. When you do invest in middle class neighborhoods, you need to know if there are HOA fees. And you need to know how much that fee is. These can vary from a couple of hundred dollars each year to as much as $400 every month.
Of course, you’re going to have the typical property tax and you need to know how much that is. Some locations require the landlord to be responsible for utilities such as water and garbage. Generally, these are locally owned government utilities.
Learning how to be a landlord also means learning the federal and local regulations. Key among these are the Fair Housing Act and the Fair Credit Reporting Act. Violation of these laws can be very costly. Neither is difficult to understand but you do need to read them and abide by them. You also need to review these regulations occasionally (yearly) to remind yourself and to look for changes in requirements that you need to meet.
By Wendy Patton
For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.
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