So you've purchased your first rental property and are now ready to dive into the world of being a landlord. You got a pretty good deal on that house, have run the numbers and have decided in order to cut costs to manage the property yourself instead of hiring a full service property management company. How hard can it be; you know how to fix a leaky toilet and paint. Plus it would be fun taken on a more hands-on approach with your investment.
You've already got a pretty good idea of what type of tenant you want, right? And you're going to tailor your ads to target this type. And of course you've got a rental rate already in mind that will not leave you with a negative every month. You also went to the local office supply store and picked up one of those ready made "one-size-fits-all" lease agreements. Cool...
You're feeling like that weekend real estate seminar you went to called "How to become a Landlord in 3 Easy Steps" is paying off. Just do a few more of these deals and you'll be out of the rat race in no time. Sounds great, right? Yes that sounds great, but now comes the realty.
Being a landlord does not happen over night. It takes lots of experience, knowledge and lessons learned.
- It can become a full time job if handled properly.
- It can become a nightmare if not handled properly.
- It can be fun and stressful at the same time.
- It can become overwhelming
- It can make you laugh
- It can make you cry
- It can make you rich
- It can make you poor
- It can make you the hero
- It can make you the villain
I would never discourage anyone from not giving it a try. The best way to learn something is by hands-on experience. Just keep in mind, being a landlord is the same as running a business and there are legalities you must follow and adhered too.
Here are just a few things to consider before deciding if landlording is right for you:
- On a federal level, tenants can not be discriminated against based on race, color, religion, sex, national origin or disability.
- On a state or local level, it can go further by not allowing discrimination based on marital status, sexual orientation, presence of children, age, occupation, source of income (government assistance, section 8), educational status or medical status.
- Market condition, location and amenities or lack of will dictate how much you can set your rent at. It has nothing to do with making sure you cover any negative scenarios.
- You better know more than how to fix a leaky toilet and paint.
- Never schedule a vacation around the 1st of the month. Actually no time is good.
- Have the yellow pages handy, or just rip out the pages listed under "handyman", "plumber", "electrician", "carpet", "carpet cleaning", "painter", "hardware stores" and just cause in case "Lawyer" for quick reference.
- You'll need a cell phone at all times
- Always keep money set aside for the "just in case", because the "just in case" will happen.
- Once you've run the numbers and have come up with the monthly expenses of running your property, go ahead and add at least 10% more; because you'll need it.
- Attend as many of your local hardware stores "How-To" home repair demos. Being a jack-of-all-trades comes with the territory.
- Locate the nearest marshall office or district court from your rental property. You may need them in case you need to start the eviction process.
When I hear people talk about all their horror stories, how they lost their shirt investing in real estate and how you can't make money owning rentals, you can bet it's because they didn't know how to play the game. They didn't even know the rules. I've had my share of horror stories, but I've learned from them and have moved on and will make better choices in the future.
Understand the rules of the game, play by the rules and you just might succeed.