Owning a rental property is a common way people say they make “passive” income. The opportunity to earn a profit, while not working for it is tantalizing to many people. One popular option the under-40 crowd is exploring is buying a property with a rental attached. Is the landlord life the right choice for you? Here are four things to consider before jumping in and becoming a landlord.
It is a Commitment
While many consider rental property to be a passive income, it does require time, energy, and a financial commitment. Yes, the property may pay for itself and then some but what happens when the refrigerator gives out? It is important to remember that while a tenant is paying the mortgage, you are responsible for everything else that happens to the rental space.
When purchasing, or rehabbing, a space as rental property it is important to consider the quality of the work. If you have a space that looks beat up and run down, tenants are far less likely to take care of it. Providing a nice, clean living environment is essential to having quality renters who want to pay their rent.
Plan for Problems
While it can be tempting to download a lease from the internet and move forward with that as a legal document, an attorney should be considered to provide input. This way, you can be sure your lease contains everything necessary to protect you and your property. Also, a common reason rental property is not solvent is because landlords are not prepared to legally deal with the rent not being paid. You should consider having a lawyer available to pursue payment officially, to ensure you are not left in the dust.
Screen your tenants ahead of time and you will avoid most problems landlords have. This will allow you to be confident that your tenants are not in any legal or financial trouble. Also, be forward thinking. Most tenants would prefer to pay their rent online. There are plenty of ways you can set up these types of payments to allow convenience for both you and your tenant.
Becoming a landlord is a serious decision. It is not a “set it and forget it” kind of job. While it is certainly a way to earn extra income, it does not come without its own set of tasks. Consider these four things before committing to becoming a landlord and make an educated decision on whether or not you are ready to take the leap.