The idea of making money from a rental property, without a doubt, is very appealing. It’s even more lucrative if you’re planning to quit your 9 to 5 job and enter the venture.
However, no matter how attractive the idea may seem, becoming a landlord requires a lot more patience and nerve than other businesses. Also, keep in mind that there’s no guarantee you’ll make a profit right away.
But it doesn’t mean that the challenge isn’t worth trying. Here, we enlisted some questions you should ask yourself if you’re considering becoming a landlord. They will help you determine the qualities this venture requires you to possess.
Being a landlord means you need to shell out money on a regular basis. Plus, it may take years before you start collecting rent to meet your expenses. So, basically, you need enough finances for:
Unless you don’t have an inherited property (fully paid for), you have to plan to purchase in cash. For that, you need a down payment on a mortgage. Note that getting a loan to buy a rental is typically more challenging and expensive than buying one for a primary residence. It’s because lenders consider investment properties riskier.
Renovating or upgrading the property before renting it out is an important step to earn good profits. Even if you invest in a property that is already complete, you may need to make some emergency repairs that come up throughout the year.
There are months when your tenants may not make rent payments for one or reason or another. In many extreme cases, such as pandemic-related evictions, you might be subject to government mandates that could interfere with your ability to kick out your tenants for non-payment.
Owning a property means incurring many liabilities. Put simply, if you don’t know how to fix something soon, your tenant may sue you.
This is why you need to purchase liability insurance that can protect your assets and investment. It’s better to set your property as an LLC (limited liability corporation) to keep your assets safe from potential lawsuits.
You can’t make it until you’re willing to handle difficult tenants. The tenants could be of any type, including people who love playing loud music to disturb neighbors and the ones who don’t mind damaging your property.
In a situation like this, you need to be willing to opt for the eviction process when necessary, which can be both time-consuming and costly.
There are notable tax benefits that accompany rental property investments. You may get them only if you know how to deal with the tax complexities. You must understand how to deduct the expenses of rental property, including the interest.
Ask yourself these questions to assess whether you would be a successful landlord or not. Although the income can be very rewarding, being a landlord takes a lot of responsibility and work.