Have you dreamt of becoming a landlord? Are you curious about what the career entails? When it comes to pursuing a career as a property investor and landlord, people typically have lots of questions.
And though you won’t get all the answers until you dip your feet into the industry and begin building your own career, there are a few things you can and should know prior to getting started.
Eight Things Landlords Wish They Had Known Before Starting Out
Ask any seasoned landlord what he or she wishes had been clear before starting out and the person will most likely cite some of the following items. Some are good, some are bad, and others are just … well, interesting.
The profits on a given property will depend on a number of factors, but property taxes will play an undeniably major role. Unfortunately, taxes are one of those elements you can’t exactly control.
The government can and does raise rates without much notice. Just ask landlord Holly Johnson. “One of the first lessons we learned about owning rentals came as a huge, scary surprise and ended with a night of tears and weeks of stress,” Johnson recalls.
“I’ll never forget the day I opened our property tax bill for our first rental and realized that our property taxes had gone up 300% overnight.” This is obviously an extreme example, but it illustrates how much your expenses could vary.
Going into this line of work, you have to be ready for sudden surprises and learn how to adapt. In Johnson’s case, she eventually adjusted the rental rate so it become profitable again, but that entailed waiting for the current year’s lease to end.
As a landlord, you’re apt to learn that losing control is okay … or at least bearable. At first, the thought of total strangers living in a home you own can be scary. What will they do? What if they break something?
Well, here’s a news flash: Odds are they won’t take care of your property as well as you would. They will break things. But if you have a plan in place, you’ll be just fine.
A lot of damage can and maybe even will happen if you aren’t careful. Frequent visits are worthwhile … and have to include some wiggle room in your budget to cover sudden expenses and other issues.
If you love neat spreadsheets with consistent figures and steady revenue, then being a landlord is probably not for you. The numbers don’t always align the way you wish they would.
In addition to property taxes jumping and the occasional broken pipe or faulty appliance popping up, you’ll encounter vacancies, annual maintenance, and other surprise costs. In some months your revenue will be higher, in others it will be lower. Perfectionists beware!
Don’t wait until you have to pursue legal action to evict a tenant to recognize that initial screening is crucial. Extracting a tenant, cleaning up the property, marketing it, and finding a replacement tenant can be very expensive.
You can save a lot of heartbreak by making screening a priority from the very beginning. Before every purchasing your first property and attempting to fill it, develop a strategic screening process.
This should include multiple layers of security and a hard look at such criteria as income, job stability, references, credit history, criminal background, and perhaps more.
If you want to be profitable from the beginning, understand that you make most of your money when you purchase the property. In other words, the only way to be profitable from month to month — and eventually sell the property for a decent amount — is to pay the right amount up front.
Overpay at the start, and it doesn’t matter how much you charge for rent thereafter; you’ll have trouble breaking even.
“The daily life of a landlord is much more impromptu than structured,” says Erin Eberlin, a property investments expert. “It is not the type of life where you get to work at 9:00 A.M, go to lunch at noon and leave at 5:00 P.M. One day you may have one hour of work to do while the next you may have fifteen hours of work.”
For some, this lack of a rigid schedule can be extremely frustrating. It can make planning anything in the mid to distant future a challenge. Most landlords figure out how to make this an advantage, though.
If you want to go to the gym in the middle of the day, you can probably find a time. Need to take a day off? It’s usually easy to shift work around. So there are pros and cons to this setup.
What most people don’t know is that, for all the stressors that come with it, being a landlord can be incredibly rewarding. There’s something very satisfying about owning properties and providing shelter for other people. It’s also one of the smartest financial investments you can make, since real estate generally appreciates over time.
When most landlords start out, many try to handle everything on their own. This can work if you have only one or two properties in your portfolio. But as time passes and you accumulate five, ten, or fifteen properties, it’s no longer reasonable (or even humanly possible!) to do everything yourself.
If you attempt to manage everything on your own, the odds are you’ll get burned out very quickly. Hiring a property manager is one of the smartest things you can do, and it’s better to learn this sooner rather than later.
At Green Residential, we pride ourselves on our ability to provide professional property management services that are both cost- and time-effective for our clients. Whether you’ve been a landlord for decades or are just getting started, we would love to sit down with you and discuss your career goals.
Every successful landlord needs a strong property management partner … and we would love to fill that role for you. Contact us today for more information!
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