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Many people get into property investment, owning and managing rental properties because of the idea of passive income. On paper, it seems to be every person’s dream come true. The reality is quite different.l There’s more to being a landlord than just handing out keys to rental units and waiting for the money to roll in as you sit back and collect rent checks each month.Owning rental property requires a lot of hard work, patience, and meticulous planning. It’s true that owning and managing can generate sizable income, it’s important to understand that it is still a job that requires time, effort, and dedication.There are advantages and disadvantages of this job. Some of the pros that draw people in are the prospects of a monthly pay check, equity as an investment,financial and personal independence, which are all very attractive.
If you are considering becoming a landlord, it is important to first make sure that your strengths, personality, lifestyle habits and schedule fit with the daily expectations and duties required to be a successful landlord. Only you can decide if becoming a landlord is worth your time and effort. By knowing what you are getting yourself into before you do it, you will be much better prepared for the obstacles and challenges that you encounter along the way.
So do you want to earn a living through owning and managing rental properties?Take some time to thoughtfully consider the pros and cons. There are great perks to the job, but also certain drawbacks. Take some time to answer these questions honestly if you are considering becoming a landlord but are still teetering on the fence. These questions will give you insight in to whether you have what it takes to be a star landlord.
The daily life of a landlord is very similar to that of an entrepreneur. Your work life will be less structured in many ways, and it will take good time and stress management to handle the impromptu and spontaneous tasks coming your way. Gone are the days of your structured schedule where every day begins at 9:00 a.m on the dot and ends at 5:00 p.m. The life of a landlord can be very erratic.Experience landlords will tell you that each and every day is different. You may only work half days some days, and much longer days on others. Your daily obligations can change quickly in order to take care of any tenant needs and requests. Your daily obligations can change and will change spontaneously. You may be expected to meet your tenants at a moment’s notice to collect rent, deal with repairs or address any concerns that they have.
Do you have the skills and ability to be an independent worker and take leadership to drive the direction of your business’s growth? As a landlord, you will need excellent time management calls, especially if you don’t have a team to help you execute all the daily tasks. You are in every sense an entrepreneur. If you can’t even get yourself up in the morning, or if you are not good at setting goals for yourself and accomplishing them within a reasonable time frame, then you should think twice about becoming a landlord.
Are you the type of person who likes to do your own work and fix things around the house? If so, you might be a good candidate for becoming a landlord. When you first start out in the business, it doesn’t make any sense to outsource the work to independent contractors if you want to turn your rental income into profit. By doing things yourself, you save money. You will be called to handle repairs and be a skilled leader in overcoming obstacles on a daily basis.
As an property investor and/or landlord, it is your responsibility to play many roles. You will have to be a good realtor, net worker, negotiator, researcher,salesperson, repairman, debt collector, supervisor, and more. Most landlords start out with just one or two properties. At this stage, it’s not necessary to hire a team to help you. You may not have the money to allocate to extra help, which means you will have to learn to make do with doing a lot of these tasks yourself. You will have to do things like, advertise and list your properties,set up appointments with prospective tenants, screen tenants, make hard decisions, and this is all just the tip of the iceberg.
Just because you have a purchased property does not mean that you will steady income right away. Your job as a salesperson will be to give exposure to your property and find the right tenant to move in. You are selling yourself and your property to prospective tenants just as much as they are selling themselves to you. Why is your property the right fit for them? Why is it more desirable and valuable than other similar properties on the market? Ultimately, how do you convince prospective tenants to rent from you? These are all skills that you will need to develop if you don’t already have them.
The landlord also has to play the role of detective when trying to select the right tenant for a property. Every landlord should gather information about the tenant through applications, in-person meetings, credit and background check sand references. However, these are just the bare minimum of what you should and can do. It takes an experienced eye and assertive instinct to analyze all the information gathered, to determine if a tenant will be the right fit for your property. There are little clues you can look for, such as how an individual carries himself or herself, whether they look like they take care of themselves, because if they can’t even take care of their appearance, chances are they won’t bother too much taking care of your property. Does the person in question have a track record of paying rent late? How long did their previous leases last? Why did they end their lease? Was there an eviction? Complaints from neighbours? Bad reports from their references? It’sup to you to investigate and find out the truth because you can’t always take people’s word as the ultimate truth. Everyday will have its own set of challenges, and you will need to either excel at problem solving or enjoy a challenging non-routine work-life.
Having to double up as a repairman is one of the negatives that often stop people from managing and owning their own properties. A landlord needs to have extensive knowledge about how to handle maintenance requests. You may be called to fix anything from broken doorknobs, clogged toilets, burst water pipes,malfunctioning air-conditioning or heater systems and so on. As a landlord, you need to be ready learn new things everyday. Self-education is crucial and will save you a lot of time, money and tenant complaints.
If your ultimate goal as a landlord is to expand your property portfolio beyond just a couple of properties and wish to earn a living from it, you will need to know how to work with the right people. The real estate industry is all about knowing the right people and having the right connections. You may need to call in help from contractors, interior designers, photographers, marketers…etc.Your personal relationships in the business play a huge factor in the success of your business. You will be in a much better position as a landlord if your have solid relationships formed within the industry. For example, if you are areal estate agent, you have a much better shot at accessing potential tenants if you have connections in the business. Word of mouth is incredibly important.If your name goes south, so does your business.
Unless you have the money and are willing to cut in to your profit by hiring a company to manage your properties, be prepared for calls at all times of the day and night. If you are juggling a full time job while also working on the rental properties, you might find yourself losing steam at times with competing priorities on your to-do list.
Working in real estate takes good people skills. You are expected to work with a laundry list of people if you want to be successful, so you had better enjoy being around people. If you are an introvert, working in real estate might be challenging and intrusive for you. Tenants can be awful. Not all the time, but you have to be prepared to work with difficult tenants from time to time. I mean, we can’t’ hit the tenant jackpot every time! Renters don’t feel very liable to meticulously care for a property, your property. Oftentimes, a tenant will leave the place a little dirty, with wear and tear upon move out. It is up to you to fix it back up with proper maintenance.
Tenants sometimes don’t make their rent on time, it’s your job to figure out ways to collect rent from them. Sometimes, it’s not easy and you could be chasing a tenant for weeks or months before he or she pays up.
How will you purchase your first property? Do you have cash and savings to buy your starting out properties? Before you get carried away by the excitement of becoming your own boss as a landlord, first figure out strategies to generate a positive cash flow. You have options to buy with cash, seek a mortgage, or get a loan, but all three options can result in how your business will run, and whether it succeeds or struggles. If you choose to purchase a property with cash, every cent of rental income that you receive (after maintenance and other operational expenses are paid, is essentially profit straight in your pocket.
Owning and managing properties to rent out is a business, which means there are legal rules you must follow and live by if you don’t want to land yourself in hot water. Every market, every location, country, and city has its own legal rules you must abide by when you become a landlord. You must abide by your market’s housing laws, landlord-tenant laws, safety codes and procedures and so on.There are policies and laws set in place to protect people in the real estate industry.
As we have mentioned already, there is a progressive learning curve to become a landlord. Intelligence is one thing, but it doesn’t help you with the unknowns and unexpected things that can happen. Not only will you have to rely on logic and practicality, instincts will play in to how well you problem solve and learn through experience and road bumps along the way.
Most people quit before they get to a point where they are comfortable with the steady stream of income. What sets apart the ones who succeed and the ones who fail ultimately is perspective and persistence. Can you look beyond the learning curve and understand that it may not be an easy road to success? Are you wiling to prevail and persist through the challenges and setbacks that come your way? If you fall, can you dust yourself off and start again? Are you willing to be patient in order to reap the rewards?
It would be a lie to tell you that there are no headaches and struggles that come with the life of a landlord, but there are also great rewards. There is obviously the aspect of monetary reward, but there is also the reward of personal and financial freedom that comes from running your own self-sufficient businesses and being your own boss. This is not the path for everybody. Some people rather enjoy a set routine and prefer a work schedule of a 9-to-5 job. The job ends when they leave the office and they are happy with that. For others with a more independent and entrepreneurial spirit, being a landlord is a much more attractive and rewarding option.
Are you interested in earning a living through rental properties? If you have considered becoming a landlord but have decided against it, what were the factors that held you back? We would love to hear about your experiences and how we can help you.
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