Tag: Landlord

Categories
Landlords

7 Ways to Attract Newly WFH Tenants

Now that work-from-home is normal, many Americans are planning to move!

The pandemic has shown both employers and employees that remote working is possible, profitable, and preferable. Employers enjoy lower overhead costs, while employees can relocate to areas with a lower cost of living and larger homes.

Don’t believe that work-from-home is really here to stay?

Just check out these statistics from Upwork reports:

  • 1 in 4 Americans said they’ll be working remotely in 2021.
  • The U.S. predicts an influx of 14-23 million remote workers soon.
  • 14-23 million Americans intend to relocate as a result of remote work.
  • 36.2 million Americans (22% of the workforce) will be working remotely by 2025—an 87% increase from the number of remote workers prior to COVID-19.

With so many people planning to relocate, your tenant base can expand beyond the traditional type of applicants you received in the past – like those who work at nearby companies. Tenants can now come from anywhere, work anywhere, and will have priorities that are different from tenants who commute to a job nearby.

As a landlord, you need to know what these remote-working tenants are looking for, so you can tailor your marketing efforts and investment strategy to capture this huge new market.

Let’s look at 7 different ways you can attract them:

1. Offer a Work-Conducive Space

Whether your rental property is a stand-alone house or apartment units in a building, remote workers now prioritize a space for working almost as much as a space for sleeping! They will look for a home that’s well-lit and has a dedicated office space, ideally – perfect for long hours of work.

This could be as simple as a secluded corner where an office table would fit perfectly, or a spare bedroom that’s easily convertible to a home office. Both areas should be ready for additional electrical wiring (e.g., outlets or light sockets) and additional shelves or cabinets. Remember, remote workers will be spending at least 8 hours of their day in whatever working space your home can provide—if you want to attract them, you need to cater to their working needs and make this area as ideal as possible.

2. Advertise Where They Are – Online

With the coronavirus solidifying our dependency on technology, many landlords have already adapted to digital means of advertising. Now, with most applicants finding and even viewing properties online, digital listings have become more important than ever.

In other words, you need to create a killer ad on real estate sites and renting platforms, or else nobody will find you!

Aside from standard details, such as the rental rate and location, you should also highlight parts of your property that will be attractive to remote worker renters. This will vary from property to property.

For apartment units, this may mean laundry services or swimming pools, but the most important thing is to make sure there are stable, fast internet speeds available from providers in your area. It may also mean plenty of nearby businesses, shopping centers and other local amenities, like services to support remote working (print shops, etc.). With proximity to the office becoming a lower priority, having amenities and services near their residence might appeal to tenants more than commuting times in the current environment.

In special cases, you might advertise a home specifically because it gives the off-the-grid appeal. Remote workers finally being able to move away from the city might be on the lookout for a quiet retreat from the hustle and bustle of metropolitan life, so rural and remote rentals might be more in-demand now with WFH tenants.

3. Emphasize Value for Money

One of the biggest reasons why remote workers move is because they want to pay lower rent, and they’re now no longer limited to renting in expensive areas, just to be closer to their office.

Think about this when marketing your rental properties.

For example, if your home is a 3-bed, spacious property in a Class A neighborhood that rents for the same cost as a 1-bedroom apartment in your closest major city, you could say: “2000 sq ft house on ½ an acre (in an award-winning school system), for less than the price of a Chicago apartment!”

Speaking directly to the pain points currently experienced by your tenant base will help make your listing more appealing to them, and could help you stand out from the crowd when marketing to WFH applicants.

4. Provide 3D or Virtual Tours

Because of social distancing rules, travel restrictions, and the risk of infection, many people now avoid visiting properties in-person. Providing virtual tours for prospective tenants will allow them to “visit” your property freely at any time of the day – from anywhere in the country! This makes it easy for remote workers who are planning to relocate to view your property, even if they’re stuck in the middle of a city at the moment.

There are plenty of softwares available on the market that specialize in creating virtual tours for your property. Consider getting a professional to come film and create your virtual or 3D tour, because in some cases, it will be the only point of reference your tenants have before deciding whether or not to rent your property. It’s important to make a great impression with your tour, so spending a little cash on having it done by an expert is well worth it – especially since you’ll be able to re-use the same 3D tour in future years (as long as you don’t do any major renovations).

5. Assure a Contactless Process

Now that remote work is becoming the norm, you (as the landlord) should also consider having a contactless process for managing your rental properties. Not only will this make things easier for you to manage, but it also makes the system safer for your tenants.

Nearly everything in real estate can be done remotely, such as:

  • Self-guided virtual tours
  • Thorough tenant screening
  • Document preparations
  • Securing digital signatures
  • Collecting rent via online portals
  • Delegating, coordinating, and monitoring tasks to contractors

As a bonus, remote worker tenants will most probably have no problems adapting to a digital process – in fact, it’s what they’re used to, at this point! Mention in your listing that you offer these contactless solutions, and it can help attract these tech-savvy tenants.

6. Highlight Health & Safety Measures

Moving during a pandemic can be a scary undertaking, especially if tenants are worried about coming into contact with the virus when they move into their new home.

To give them peace of mind, make sure you thoroughly disinfect the property before move-in day by deep-cleaning the carpets and furniture, mopping floors, wiping down surfaces, and clearing the ventilation systems.

You can hire a professional disinfection service to sterilize the property with UV light, smoke, or cleaning solutions, and even provide a certificate stating when the disinfection took place. Again, highlighting these safety measures in your ads will help reassure applicants who are concerned about transmission.

7. Allow their Pet Companions

According to The Humane Society of the United States, 72% of renters have pets. Now that many people are transitioning to WFH, this number might even increase.

Some tenants who never were able to care for a pet before due to long hours spent out of the house might now decide to get that puppy they’ve always dreamed of, since they’re working from home. Others may be feeling isolated during the lockdown and have only their furry friend to keep them company – so if your rental means giving up their pet companion, it might be a deal-breaker! Allowing pets right now therefore could be an additional way to attract remote workers as tenants.

However, if you don’t want to consider having pets in your rental properties, just be aware that more tenants could be trying to sneak in unauthorized pets now than in previous years – so that’s something to keep an extra-close eye on when inspecting properties.

Conclusion

The best landlords are always on the lookout for the next real estate trends. Remote working is just one of the huge trends that emerged in 2020, but experts are predicting that it’s a trend that will remain in 2021 and beyond.

Because of this, landlords need to make sure their rental properties are primed to attract the huge influx of remote workers who are on the hunt for a new home.

Take advantage of this new opportunity to meet the demands of our ever-changing society—and grow your rental business in the process!

Are you renting out to remote-working tenants? What are the things they tend to look for, in your experience?

Image courtesy of Teryn Elliott

Categories
Landlords

How to Calculate Rental Return: How Much are You Making from Your Rental Property?

How much can you actually expect to make from rental property investments?

This is a great question, and one without a straightforward answer. 

That’s because the amount of rental income you receive from a particular property depends on the financial viability of the deal, as well as how well you manage it. 

In this article, we’ll give you some tips for identifying profitable rental investments, and some rough rules-of-thumb for calculating the potential profitability of a rental property. If you want a better idea of how property management can impact these figures, check out this article. 

Financial Viability

Here are some formulas you can use to help you determine the financial viability of a real estate investment.

Return on Investment (ROI)

ROI is used to measure the performance of an investment by evaluating the expected return relative to a property’s cost.

Add up the cost of acquisition, closing fees, repair costs, and annual expenses. Then, divide your total annual income (from rent) by the sum of your expenses to arrive at your yearly projected ROI. There is no sweeping standard for a “good” ROI, but if we were to aim for a benchmark, you’d want to look for a yearly ROI that’s above 15%. 

Cash-on-Cash Return (CoC)

CoC calculates the yearly returns based on cash income and cash invested. In other words, it measures how much you’ve made on the property in relation to how much you’ve paid for the mortgage.

Get your annual pre-tax cash flow, divide that by the total cash you’ve invested, and you’ll get your CoC return. Expert investors advise aiming for a CoC return that yields around 8% to 12%.

Capitalization Rate (Cap Rate)

Cap rate is the ratio of net income to the property’s acquisition price. There’s no “good” or “bad” cap rate, but it’s great for comparing your return across multiple properties. Here’s a quick guide on how to calculate it:

Get your net operating income (NOI) by taking your gross rental income and deducting every expense you have (excluding financing), like taxes, insurance, water, HOA fees, etc. 

Then, divide your NOI by the current market value, and you’ll get your cap rate. In riskier neighborhoods, 6% probably won’t be worthwhile. But in high-demand, high-quality neighborhoods, 6% could give you an amazing return.

The 1% Rule

Lastly, the 1% Rule is a quick calculation to determine if the monthly rent earned will generate positive cash flow for a property or not. The rule is that the amount grossed through monthly rent should be at least 1% of the final property purchase price (including the cost of any repairs). 

Calculating Profit

Now that you can identify money-making opportunities, the next step is to answer the following questions to calculate the profit you’ll get to keep.

How much rent will I realistically charge?

Start by surveying other rentals in the vicinity to get an estimated rental amount. You can ask a local realtor or property management company for an accurate number, or visit sites like Rentometer.com for a rough estimate.

If you end up with a range, stick to the lower number for a more conservative approach when assessing a deal and making your other calculations.

How do I know what the expenses will be?

When calculating your profit, you must add up all the expenses, including property tax, insurance, property management, and possible vacancies. Assume that these expenses will cost roughly 40% of your rental income. 

While it may sound like a lot, this figure is actually a conservative estimate and doesn’t cover any serious renovations or overhauls that a property might need.

What about the other 60%? 

If you took out a mortgage on the property, the mortgage payments will be covered by the other 60% of your rental income. This means you should only secure loans with monthly payments which total less than 60% of your estimated revenue from rent.

What happens to the remaining money?

Whatever is left over will be your profit. However, this is also what the government will charge taxes on. The taxes you pay on this income are not included in the property tax you pay annually. 

There are ways to lower your taxes as a real estate investor, but for this article, just remember to budget for paying both income and property taxes when calculating your potential profits.

Conclusion

How much can you earn from rental properties? How do you know if a rental investment is worth it? 

Just answer these two questions:

  • Is the investment you’re eyeing a profitable opportunity?
  • How much can you earn from renting out the property?

If the property passes all these common metrics with flying colors and earns you the rental income you’re looking for—you’ve just found a profitable rental property to invest in.

Image courtesy of David McBee

Categories
Landlords

How to Write a Perfect Property Description to Attract the Best Tenants

Your property listing is the very first touchpoint between you and your ideal tenant, so it’s pretty essential to get this right.  A big part of this is the written property description which should appeal to the type of person you’d most like to have as a renter, whether that be young professionals or middle-class families. This article will show you how to get inside the mind of your prospective tenant and tailor your description to speak to them, just like professional marketers do when they want their product to stand out from the crowd.

Think Like a Marketer

As you prepare your rental listings, always write to attract your target tenant. You can do this by finding out as much as you can about their interests, concerns, and needs, and addressing these within your description.While you can’t discriminate as a landlord, you can still tailor your messaging to make it sound more appealing to your preferred target demographic, making them more likely to choose your home over another similar property on the market.

Know Your Audience

Once you have an idea for who your target tenant is, you can use tools like social media to help get inside their head. Look through property groups or ads on Facebook, and read through the comments to get an idea for the types of questions that concern your audience, and even the language they use to describe their ideal home. Write these words down and incorporate them into your property description, to help your home appear when they search for these keywords online. 

Do Market Research

You can also use social media, and other property listing sites, to get a feel for the competition in your area. The point here is not to copy other descriptions, but rather to understand the ways in which your home is unique, so you can better emphasise these qualities in your own ads.

Craft Compelling Copy

There are two kinds of buyers: emotional and rational. You can make your marketing copy appeal to both of these kinds of prospective tenants by choosing the right words.

For those driven by emotion, tell a story with your property description to help them imagine themselves living in your home (e.g. “Curl up by the fireplace in the evening with a good book”). Just make sure the story you use is something that would speak to your ideal tenant.

For those driven by logic, the best way to “sell” them on your property is to remove any element of doubt from the equation. To do this, try to answer any potential question they may have about the property in the description itself. Take note of all the questions you see while doing your online research, as well as those which are asked most frequently by your prospective tenants, and incorporate the answers to them in your ads. This way, when they see your property, they’ll be able to tell right away whether it’s right for them, and this will give them confidence to choose your place over all the others on the market.

Embrace The New Normal

In the era of the new normal, tenants’ priorities are changing, so highlighting features which appeal to people in the current climate is another way to help make your property stand out.. Concerns about  privacy and seclusion from neighbors, and the presence of big indoor/outdoor spaces, entertainment or recreational areas, large kitchens, home offices, and spaces which can be easily separated to accommodate people living and working at home together are just some of the things that tenants are now prioritizing more than ever before, so if your property has any of these features, make sure to emphasize and leverage on that as a selling point.

When creating your listings, you don’t need to stand out by having the fanciest property description in the entire market. You only need to stand out to one person: your ideal tenant. The best way to do this is by tailoring your language to address their desires and concerns directly, just like the best business marketers do.

Image Courtesy of Ivan Samkov

Categories
Landlords

5 Problems You can Avoid with Great Screening

Rigorously screening your tenants is everything in landlording. Why? Because great tenants will make you wish you got into landlording earlier, however, problematic tenants make some landlords wish they never began investing in the first place.

If you don’t want to end up with regrets – screen your tenants! Here are just a few of the problems you can avoid by doing so:

  1. MISSING & LATE PAYMENTS

The occasional late payment is one thing, especially if the tenant is just going through hard times (like a pandemic). But no landlord wants to end up with tenants that never pay on time, or never pay at all. Non-paying tenants will give you a headache trying to reach them, turn a blind eye to the lease agreements, and eventually, when you finally threaten them with eviction, pay only partially, just enough to stay a bit longer in your rental.

However, by screening well, you’ll see their employment status, current income, credit history, and talk to their past landlords to find out if they pay rent fully and on-time. This is the only way to help guarantee yourself consistent income through their rent – which is the whole point in renting out your properties.

  1. EVICTIONS

Processing evictions is expensive, time-consuming, and extremely stressful. Common reasons for evictions are non-payment of rent, lease violations, property damages, or illegal activities – all of which are pains you can avoid by screening well. 

You can avoid getting yourself into situations that require evictions by looking out for any concerning things during the interview screening. How responsible are they with their finances? How did they behave in their past rentals? Are they rule followers (e.g. did they follow the lease agreements at their previous rental)?

For more on how evictions work in Michigan, head on over to this link.

  1. PROBLEMATIC TENANTS

Some tenants don’t take their landlords seriously. They may seem great prior to renting, but this doesn’t mean they will continue to behave once they’ve secured your property. 

Some will damage your property. Some will harass the neighbors. Some will want you on standby to attend to any of their requests, no matter how unreasonable or small. Just look up “tenant horror stories” on Google and you’ll see what we mean! They will make you wish you hired a PMC (which you can obviously consider doing, too) or at least have screened them properly before handing the keys over to them. 

It’s just not worth it when you can verify their historical data and call up their references to check their behaviors. 

4. DIFFICULT MAINTENANCE

Since tenants have no attachment to the property, many lower class (C and D) tenants won’t take care of it as much as you wish they will. But you’ve invested good money in your units, so why wouldn’t you also invest in good tenants to take care of them?

It only takes one sloppy tenant to reverse the improvements you’ve done into costly damages you’ll be forced to fix. One dog to scratch the hardwood floors, one lazy tenant to neglect the overheating boiler, and one hoarder to turn your rental into an insect hub.

To avoid this, ask previous landlords how they were during their tenancy. Were there any problems with property damage, housekeeping issues, or living habits? Also ask if deductions were made from their security deposit, and get an explanation as to why. If tenants can’t provide a suitable, well-documented explanation for any sketchy rental history, beware!

5. HIGH VACANCY RATE

The words “high vacancy rate” should scare any responsible landlord, because an empty rental investment is just losing you money by the month. The vacancy rate compares the amount of time your property could have been rented versus the time it’s actually rented, so you want it to be as low as possible. Common reasons for vacancies can be because the tenants you get are always leasing short-term, the tenants are often problematic and have to be evicted, or the tenants ruin your property and you need to do major repairs – either way, your business is not generating profit during this time.

To prevent this from happening, verify the following during screening: Do they tend to move residences often? Do they have stable employment? How long do they plan to stay in your rental, and do they have the financial stability to commit to a longer lease? Look at past rental history, previous addresses, credit and employment history to figure this out.

Tenant screening is the last area of your property management that you want to skimp on. By being cautious before accepting an applicant, you can avoid more than just these five problems – you can eliminate most, if not all, of the things landlords have to stress over. 

Any experience you’d like to share on how tenant screening saved your life as a landlord? Comment below!

Image Courtesy of Ketut Subiyanto

Categories
Flipping Landlords

How to Target Metro Detroit Landlords with your Flip (Part 2)

Last week, we looked at how to plan your flip to target an owner-occupier buyer in Metro Detroit. This week, we’ll take it a step further and consider how to market flipped properties to another kind of buyer, and one which most flippers wouldn’t necessarily consider right off the bat: landlords.

Landlords are probably not going to pay as much as an owner-occupier would, but they could be a consistent buyer for your properties, so building relationships with local buy and hold investors could be a great back-up strategy for marketing your flips.

Especially in the current economic environment, having a consistent buyer for multiple properties could be a serious boon for flippers. More people are choosing to rent long-term rather than buy, and this trend is likely going to continue as we slowly recover from the financial strain caused by coronavirus. But, while first-time buyers could be shying away from buying now, investors are always on the look out for a good deal.

So, here are some points to consider when targeting Metro Detroit landlords as buyers:

  • Landlords are Investors, Just Like You: This means they won’t be sold purely on light, airy spaces and nice kitchen counters – they want to see the hard numbers when making their decision. Highlight the financial benefits of the property when marketing to them, like whether the area has low vacancy rates, the rent-to-price ratio, and CapEx projections for any maintenance that will be required in the coming years.
  • Lower Margins: Buy and hold investors will be looking for a deal, and in Metro Detroit they’re unlikely to be looking for a single family home that costs several hundred thousand dollars, meaning your margins on each sale will be lower. However, you may be able to compensate for this in the volume of sales you do, since a landlord could become a guaranteed buyer for multiple flips. If you build relationships with local landlords, you can also do off-market deals with them, saving both of you time and money spent on marketing and agents’ commissions.
  • Out-of-State Buyers: When you consider the fact that the rental market in Metro Detroit attracts tons of investors from out of state – and even overseas – to the area in search of high rent-to-price ratios, you can see how marketing to this group can significantly widen your pool of buyers. Most of these out-of-area investors look for properties that are fully–rehabbed and ready to rent out, meaning a fresh flip could be the perfect choice for them.

Many of them also look for ‘turnkey’ rental opportunities, meaning properties which have a tenant and property management company in place, so you can find a tenant and then sell your flip as an active rental investment. You can also partner with a local PMC to show landlords that your property comes with the whole package, turning it into a mostly hands-off investment for them.

  • Invest in Different Markets: Selling to landlords can also widen the pool of areas you can invest in, since a strong rental neighborhood and a strong seller’s market are two different things. This gives you the chance to flip properties in lower-price areas, with less upfront capital. You also won’t need to shell out as much for high-end fixtures and fittings, since these won’t matter to a landlord like they would to an owner-occupier.

Landlords may not be your primary market, but they can account for a healthy secondary market when it comes to finding buyers for your flips. Keep these points in mind when targeting local buy and hold investors with your flip, and you could end up with a lifetime customer for your business.

Image Courtesy of Lisa Fotios

Categories
Landlords

How to Target Metro Detroit Owner-Occupiers with your Flip (Part 1)

Home values in Metro Detroit were on the rise at the beginning of 2020, and are expected to continue to increase in the aftermath of coronavirus, making it an attractive market for flippers looking to add value to distressed properties. In this 2-part series, we’re looking at how flippers in the Metro Detroit area can tailor their properties to appeal to different types of local buyers in today’s economy.

The ideal buyer for a flipper is an owner-occupier, since they buy emotionally and thus will usually pay the most for your property. In a perfect world, you’ll even have multiple owner-occupiers vying for your house, leading to a bidding war that drives up the price. The key to generating this kind of demand for your property is to make sure your flip is targeted to appeal to buyers in your area.

So what do owner-occupiers in Metro Detroit look for when purchasing a house?

  1. Location, Location, Location: If you’re just getting started in flipping properties in this area, the most important thing to do is pinpoint the neighborhoods with the strongest demand from buyers. Completing an attractive flip will mean nothing, if it’s not in an area that owner-occupiers actually want to purchase in. In Metro Detroit, the areas with the strongest appeal are cities with vibrant downtown areas, like Ferndale, Royal Oak, Rochester, Plymouth, etc. The cities near these areas are also good places to focus your search. Do as much due-diligence as possible to familiarize yourself with an area before deciding to invest there, since even a few streets over in one direction can make a big difference in terms of desirability.
  2. Floorplans We’ve seen several flippers lose their shirt on a flip they did a great job of renovating, but the property had floorplan issues they didn’t or couldn’t address. Low ceilings in a basement or the upstairs of a bungalow, pass-thru bedrooms, nowhere to dine, inaccessible garages and more. Stay away from these types of projects unless you are really good at calculating an ARV that takes them into account, or your budget includes addressing them.
  3. Amenities: More than ever, homebuyers expect everything to not only be done and done well, but they want all the amenities included. Study what the market wants and include as many as you can in your budget.
  4. Security: People want to feel safe in their homes, but bars on the windows aren’t the most aesthetically pleasing design feature. Consider adding smart security features, like digital keypads and mobile-controlled alarm systems, to give your property a leg up over the competition.
  5. Social Distancing: In the era of the new normal, homeowners are starting to look at properties in a different light. Houses which have large outside spaces, home entertainment features, or are located in less population-dense areas might have a higher appeal than ever before. The same goes for layouts which are conducive to a whole family living and working from home, so think about including a dedicated office space and segmented living areas.

Plan your flip to include these features, and you’ll be in the best position possible to produce a quick sale, so you can get started on your next investment property ASAP!

Keep an eye out for Part 2 of this series, where we’ll be looking at how you can target a different kind of buyer with your Metro Detroit flip: buy and hold investors.

Image Courtesy of Lisa Fotios

Categories
DIY

Tips for Novice Landlords

People dream of becoming landlords, how hard can it be to walk to the mailbox every month, and cash rent checks?

Tips for Novice Landlords.

Let’s get it out of the way early — making money as a DIY landlord is NOT going to be as passive you envisioned. Expect to spend many of your evenings and weekends dealing with property and tenants issues.

The whole point of investing in rental housing is to collect monthly rent payments, yet this can be one of the most challenging aspects for a newbie landlord. There will be times when you have to hound tenants for the rent. Be firm about rent payments, you rely on them for running your business. Being lenient with your tenants will open the door to a slew of problems. If they don’t pay, follow your state’s laws, and if needed, start the eviction process.

So you’ve got your first rental ready to go. You’re eager to start renting and making some money. Resist the urge to rent to just anyone because you’re concerned with vacancy. Make sure to stick your plan — be vigilant about screening new tenants. Leasing to a tenant that doesn’t meet your standards will only bring more problems than it’s worth, it’s better to be patient and wait for the right candidate.

Fair housing laws are in place to protect the tenant — they are a big deal. Don’t put yourself in a position where you’ll have to defend yourself in court. If you’re not sure about something, consult an attorney, or better yet, read up and educate yourself, it’s bound to come up again.

You want your rentals to be the best they can be to attract prospective tenants, but remodeling to your (expensive) tastes is not a good business decision. It’s fine to remodel but resist the urge to go overboard. Unless your property is in an area where you can charge appropriate rental rates, it will be difficult to recoup your investment.

The right marketing strategy will make a world of difference. Make sure to use the right avenues to market your vacancies. Newspaper ads are on life support. You need to place your ads where the right clientele will see it.

Place online ads and use dedicated web sites to find great renters. To entice prospective tenants, pay a professional to take brilliant photos and create a virtual tour. This will save you tons of time by not showing your property to people who aren’t that interested or can’t afford it.

First impressions matter, don’t underestimate curb appeal. Always keep your property looking good — inside and out. Prospective tenants will never get to see how beautiful the new kitchens and bathrooms are if they pass on your property because it looks dingy from the outside. 

BONUS: Stay Organized

You may be surprised how much work is involved with your rental property business. The mountain of paperwork alone can be daunting if you’re not prepared. Paying attention to details and staying organized will help you to stay focused and promote success.

Just because you’re starting a “side business” to produce a passive stream doesn’t mean it’s going to be easy —  this is not a hobby. There is a learning curve to honing the skills needed to run your rental property, but things get easier to manage with every new tenant and each additional property.

You will face challenges, you need to treat your new venture as a “normal” business. Plan on making mistakes when you’re starting out, but expect those growing pains to wane as you acquire experience and grow. Stay positive and focus on your goals. 

Categories
DIY

And You Thought Being a Landlord Would Be Fun and Easy

That dream of living off “passive” income, however, takes a lot more work than you think.

Can landlords be available 24/7?

You’re tired of your 9 to 5 grind and figure buying real estate and renting it out will be a low-stress way of making a living, so you can eventually quit your day job. Rest assured, there’s more to that story. Yes, real estate can indeed be very lucrative — the world’s supply is limited, after all.

Rent Collection

Monthly rent checks are probably one reason you decided to get into the rental business. Collecting the rent is not as easy as walking to your mailbox on the first of the month. Though most renters are good at paying on time, it’s the inconsistent tenants that will cause you to gray prematurely. When the time comes, be ready to change your hat from the nice welcoming landlord to the merciless rent police. If you stay in business long enough, you’ll hear enough creative excuses to write a book.

How Hard Could It Be?

Any job is easy and enjoyable when things are running smoothly. But when the A/C goes out in August, a pipe burst in January or a tenant trashed the place before moving out, that’s when you will find out if you truly love your new job. All these things, and much more, will eventually happen. You need to be mentally and financially prepared to deal with them. 

For example, replacing the section of a frozen pipe is no big deal and relatively inexpensive, any plumber can do that. With the service call, drive time, and the hourly rate, you should be able to get it for around $250. Remember though, a frozen pipe doesn’t leak. What if it thaws at noon when the tenant is at work? They come home to water spraying out from under the sink or in the basement laundry area.

The area is flooded, the carpeting is soaked, and it’s Friday evening. Now you’ve got a mess, water damage, you may have to replace the carpeting, or least hire a professional cleaner. Wait, there’s more. The plumber is charging double or triple time because it’s after hours and a weekend. Don’t be surprised if you’re flirting with $1500 when all is said and done.

Managing Problem Tenants

No matter how vigilant you are with tenant screening, sooner or later, someone will sneak through that can summon your Satan. You may have heard all the horror stories, but you say to yourself, “I wouldn’t let that happen to me.” Oh, don’t worry, it will.

It’s Time For You To Go!

Evictions get ugly, are time-consuming, and the bills add up quickly. First, you’re not collecting current rent due. Then there are court filing and attorney fees. Chances are the property is going to be a mess or worse yet, damaged. If the tenant left a bunch of stuff behind, you may have to pay to store it. Then, of course, you’re not able to rent to other tenants until you bring it up to standards. And finally, you have to find a new tenant. If you’re lucky, you’ll only lose two or three months’ rent. Including court costs, your final bill could easily hit $4000 to $6000.

What’s A Balance Sheet?

If you’re the kind of DIYer that doesn’t mind getting their hands dirty but hates numbers, sorry but you’re going to have to learn. Oh sure, you can “just pay someone else to do it,” but an accountant or CPA doesn’t come cheap. Even if you can afford to hire it out, you should at least become familiar with bookkeeping and the finances of your new venture. You expect complications with your tenants, you don’t want to get ripped off by some bookkeeper.

You Need To Be A Good Banker

Hopefully, your properties are fully occupied, and you’ve got plenty of cash flow to meet expenses, and you’re stashing some away. For most landlords, the reality isn’t so dreamy. That’s why you need to stay on top of finances and bank some cash. 

Tenants come and go, but your fixed costs don’t go with them. You’ll have times when money is rolling in, and then you’ll face spurts of vacancy. It’s vital to put some money aside to keep as a reserve to get you through the dry times.

Property rentals can be very profitable, but as with any business, it’s not all peaches-n-cream. Real estate is not for everyone. There will times when you’re ready to sell the farm, followed by times that make your investment and hard work all worth it.  

x Powerful Protection for WordPress, from Shield Security
This Site Is Protected By
Shield Security →