An income property is a property you buy to invest on or to develop in order to make money. This is what real estate business is all about, you can have land, houses, or any rental property and become a landlord. A landlord is a real estate owner who rents or leases land or buildings to others. Nowadays, people are making huge amount of money from properties they own. Becoming a landlord can be a profitable venture as it can provide a steady income stream while the property appreciates in value. As a landlord, you become your own boss, you choose what tenant you will rent to, the amount you will charge in rent and the way you will manage and maintain your property.You might invest in properties such as hotels, office space, retail, shopping centers, industrial office and residential housing, the problem is to know whether or not the investment will provide income. Income generated from rental properties are generally called passive income because this is money derived from properties you are not actively involved, and becoming a landlord is one of the most popular way of generating passive income. Many people invest in properties but never see the income, they rely on capital appreciation to make their own money, but if you are the kind of investor who can front large sums of money and take big risks, this type of business might be for you. As a landlord, you can get rich as well as you can go broke. At the two extremes you may find yourself with bunch of problems as; non-paying tenants, a leaking roof, a broken pipe and economic downturns. Buying rental properties is not for everyone. You should have achieved a certain level of financial independence to consider this type of investment. If you want to succeed as landlord, you have to learn to do more of the repairs yourself in order to save some money especially if you do not have some spare cash. Real estate business has produced many of the world’s wealthy people, therefore, it is good to think that property is a sound investment. But as any investment, it’s good to be well-versed with the matter before diving in. You can leverage your investment if you do not have enough money. This means you invest a relatively small amount of your own money, and borrow the rest from a lender
There are many advantages as well as disadvantages of owning rental properties. As a landlord the advantages you have include income generated from rent, income from property value growth and sweat equity. The biggest benefit of becoming a landlord is the income you generate from the business each month. The benefits you gain from property value growth are those due to due to changing demands in the area over time even if the property does not undergo any changes. This largely depend on the area where you are investing, in some areas, this value may rise significantly within some few years, in others it may instead decrease with the course of time while in other areas it may remain flat. By upgrading your house, you are adding more value to it and you have a good reason to charge for more rent. On the other hand, the disadvantages of becoming a landlord is that, your asset is concentrated, there is tenants risk, taxes and insurances you need to pay, you need to actively be involved and so on. An investment in which asset is concentrated is not a wise investment. That is while most people always find it difficult buying rental properties. A landlord is never guaranteed that the tenants will pay their rents, some may pay on time while others will not all pay. Some tenants may cause a lot of property damage than others, it is true you can have security deposits for that but there will always be a cost and a risk. You have to pay taxes and insurance regardless your property is occupied or not. You need to devote time to your property even in the most difficult situation. You need to know if there are any repairs or changes to undertake, you need to meet your tenants to discuss with them and so on.There are a lot of challenges you face with your tenants especially the bad ones, first they do not pay their rent on time but if there is any small problem with the house your phone would not cease ringing. Even good tenants will like to have your full attention, as they satisfy you they won’t want to be in some bad conditions so there will be some constant calls. Some tenants will call you for everything so you should be ready to spend your free time doing some repairs.
The reality of being a landlord is that you can make a lot of money if do the right investments as many people do. You need to focus on whether or not the investment you embark on will provides income.What you need to do is to set a model that works and let this model guide your plan. This great plan will allow you to get to your set goals with limited mistakes. It is good to have responsible tenants because these ones pay their bills on time, they take good care of your property and they don't let you to the eviction process that is costly and also time-consuming. Some of your tenants will pay the rent, they will treat your property as theirs, they will keep the neighbors happy but you will inevitably have some problem tenants. This tenant will fight with other tenants, they will cause damage to your properties, and some will not even pay. You have to know the eviction laws and be ready to use them. It is possible you stay with a tenant for many years and because of good conduct, you decide not to raise rent. It is true you will lose out some revenue by not increasing rent, but at least you will have a peace of mind that comes with tenant that takes care of our property. Most at times people think that renting properties is just a hobby or not really a job at all, but all successful landlords will tell you property renting is a full time job. At times you can engage a property manager but here the key to succeed as a landlord will be based on trust. There is a rent smart program designed to help landlords and tenants with practical education on how to acquire and keep modest housing. This program helps the tenants to better understand the benefits to develop some cooperative relationship with their landlords as well as to improve the ability to resolve problems with their neighbors and also landlords.
Matters with becoming a Landlord
Landlords are always confronted with a lot of problems some of them are enumerated below:
Startup capital: The startup capital is the cost of purchasing and remodeling an investment property. For example, if you buy an outdated or a damage home you need to spend significant money to make it rentable.You may spend thousands of dollars in repairing things such as; the ceiling, plumbing, painting, roofing and all the other decorations. But also if you buy a home in good conditions you may still have to do some changes to suit the taste of the potential tenant.
Collecting house rent: Landlords always visualize a raise in their bank account at the end of each month. This is if they have tenants that pay their house rent on time every month. Some may slip up from time to time but at least always alerts you ahead when to expect the rent. But you may be owning rental properties and fall on a tenant that do not pay house rent and even never call. Now imaging if this tenant goes for months without pay you need to take decisions which you strike on it whether you let the tenant down or starting the eviction process. But make sure you feel comfortable with any decision you take.
Paying taxes: Property tax is the tax you pay when you own properties and this tax is always overlooked. So when you are a landlord, you need to pay taxes on the properties you rent. Make sure you understand how these taxes work and be ready to pay them.
Finance management: As a landlord, you need to learn to manage your finances when you make the money. This is because, tenants are seasonal and maintenance regards to your property may appear at any time. So during the flourishing months, you need to save enough to repair the unexpected. Note that landlord’s finances do not stay constant but if you can learn to go through the flow, and plan the unexpected, then you might survive.
How to make it being a landlord
1. Master the landlord-tenant law
It is important you fully understand the landlord-tenant law and make sure you do not break the laws. In most states the law cover issues such as the level of access you have to the property, the security deposition, and the number and length of notice you need to give your tenants when you want them to evacuate.
2. Property inspection
In the lease document it is good to make regular inspection of property clear. This can be within a given time frame say every three months and pictures can be taken to establish a baseline. This may make the tenant to respect the laws that governs the premises. At times you need not to be far from your property, this allows you to be able to check on your property easily in case of an emergency. This also makes things easier to self-manage or supervise your property.
3. Customize the lease
You may not have an attorney or a property manager to document a lease, it is possible to get a standard copy from the net and modify to suit your situation. It is important you state all what you want from the tenant in the lease. It is true that the tenants may not always abide with all your points.
4. Make sure the rent is paid on time
Limit the relationship with your tenant, if you become too friendly with them, they might cease the opportunity to rob you. This does not mean you should not treat tenants with respect but you have to be firm with them. You need to cultivate a good relationship with your tenants but make sure rent is paid on time and that repairs requested should be easy to deal with. With the real estate business you do not need to go in with a sentimental frame of mind because you might be running some charity.
5. Screen your potential tenants
It is not easy to find a perfect tenant but good to screen and find out who your tenant is, know his source of income and his position in the society.Run a credit check as well as a background check to know your potential tenant. This can help you have responsible tenants. You can check references from employers and past landlords to know who your potential tenant is and also, you can conduct an interview to make sure you can easily communicate with him or her.
What it takes to be a landlord
Before you go into owning rental properties, it is important to understand what you are stepping into. This means you need to search for the rental market in the community you want to exert and gain an understanding of current and past trends of the business to know what you need to spend and what will be the turn out profit. Below are some key things you need to know as a landlord:
- You need a lot of money: If you do not have plenty of cash, you can not afford owing rental properties. Banks are ready to lend out money but you need to have a down payment of at least 20%.
- Be ready to welcome bad news: When you are a landlord, no news is good news, you are confronted with so many situations. You will have headache with tenants that do not pay rent, those that cause destruction and go without repair and so on.
- Be ready to take risk: To most people owning rental properties is always a money-making business. This can be true but there is a lot of risks involve which include; nonpayment of rent, property damage etc…