Being a landlord is not for everyone, even if the deal is profitable. Thousands have said real estate investing is a proven way to earn riches. You can get started with rental properties, and soon you’ll have a steady stream of passive income. The statement is true to some extent. However, experienced investors will agree; you don’t see a steady stream of income until years. Mortgage payments, insurance, repairs, and property maintenance will eat most of your profit.
Tenants don’t always pay on time. Then you have to think of the times the property remains vacant. You don’t see much positive cashflow unless you pay down your mortgage and get settled into the business of being a landlord.
From experience and interviews, we have concluded this shortlist. It will help you decide whether you should be a landlord or not.
Managing a rental property takes time, even if you have a property manager. If you are married, have a 9-5 job, think twice before going into this business.
“I am a stay-home dad, dealing with two other projects at the same time. Resident complaints are the last thing I want to hear. My house is at a 30-minute drive from the rental property. It takes lots of time and effort to go into the home every once & then to fix minor issues. Being a landlord doesn’t generate passive income. Perhaps, it’s a good option when you have time, and you can patiently build the cash flow.”
A certain landlord.
You are not superhuman. If you are already dealing with multiple projects, whether it’s a spouse, relationship or kids, think carefully. Do you want to be a landlord? You can earn a better ROI by going with REIT or private money lending.
Managing a property takes time and mental resources. The cash flow should be at least positive if not significant. When considering the profit, keep a considerable margin for repairs & maintenance. Unless you are an expert in repairs, it’ll cost money. Calling a plumber for a minor issue can cost you $100, so count for that.
Read the local laws before you sign a rental contract. Tenants should be safe in your house. You can purchase an insurance plan to cover yourself against unforeseen issues. It is possible to keep the home safe, but you never know what tenants are doing in the house.
Profit depends on market conditions. If the market currently favors selling, you are not going to generate much income through rent. You’ll have to wait until the market shifts and rental rates go up.
Liquidity is another reason not to be a landlord. It’s not easy to sell a house. If you have 30%-50% of your worth locked up in the real estate, you have to reconsider your choices. Unless you are getting a handsome check every month, that locked money can be better invested somewhere else.
Do you have a rental property that you are considering to sell? Get in touch with Heritage Home Solutions!