Anyone who watches television has undoubtedly heard an ad encouraging them to leave their boring desk jobs behind and become a property owner. The rewards all sound great. You work for yourself, have complete control over the circumstances of your property (such as who lives there and what to charge), and are promised more financial success than a 9-to-5 job could ever offer.
As flashy and exciting as these ads are, however, landlordship isn’t for everyone; in addition to the time and money it takes to get started, you have to have a clear understanding of the work that will continue to dominate your life. Let’s take a look at three things you should consider before jumping on the rental property bandwagon.
- Assess your temperament: Certain professions require certain temperaments. Doctors are expected to be patient and calm, party planners are charismatic, and bouncers must be tough. When it comes to being a landlord, the worst thing you can do is be too nice. Even with a vast number of tools (such as the innovative software of Turbo Tenant) and extensive knowledge at your behest, tenants will walk all over you if you’re unable to establish boundaries and commit to them.
Remember to look at your rental property as a business; any precedents you set — such as accepting a late payment — will be hard to break down the line. At the end of the day, you’re in charge; be firm and respectful with your tenants, and you won’t have to deal with special requests.
- Know the law: Renting out a room, an apartment, or a house takes more than just a body to fill the space. You need to jump through a variety of legal hoops; the documents that tenants are expected to sign upon moving in are legally binding, and should be written with care and consideration.
In addition to understanding the nuances of the Fair Housing Act, you must be willing to put the time in to learning legal terms and the details surrounding most lease agreements. Laws vary from state to state; because one mistake can easily lead to the collapse of your business (and result in the complete destruction of your reputation), knowledge is everything.
- Figure out if you can afford it: The age-old adage, “It takes money to make money” is more true than ever when it comes to property ownership. For starters, you’ll need the property itself. Unless you plan on renting out your own home, you’ll most likely need to borrow money to purchase another building or house.
This is a serious financial burden, and one that most people can’t afford out of pocket. As a result, many consider a home equity line of credit. If you’re not sure what is equity in a property, your first task will be to research the term to determine if it’s something you’re willing and able to take on. Don’t be afraid to consult a professional. This is your hard-earned money, after all.
Working as a full-time landlord can be exceptionally profitable, but only if you’ve done your research ahead of time. Before you go bumbling into a situation that could bring financial ruin into your life, take a good look at yourself. If you believe you’ve got what it takes to manage a rental property, get set up with some of the tools of the trade (such as Turbo Tenant), and dive in. Before you know it, you’ll be able to explain what is equity in a property without even thinking about it.