If you have ever had the pleasure of dealing with great tenants who pay on time every month and treat your property like it is their own, you may think being a landlord is relatively easy. The reality is that this is much more the exception than it is the rule. Having great tenants is a plus, but it is only half the battle of being a landlord. You need to stay on top of the condition of your property in addition to the people in it. Being a landlord can be the best part of real estate investing at times, but it can always be draining if you allow it to be. Make this easier on yourself and be a good landlord.
You rarely hear about the down side of rental properties. For every story about how wonderful tenants are, you will hear a story about a nightmare scenario as well. This nightmare usually consists of tenants failing to pay or causing severe damage to the property. There are also instances where tenants allow small problems to turn into much bigger ones. Except for eviction, any other problems can be easily dealt with. However, if the problems are consistent, they will eventually affect the rest of your business.
As a landlord, you are always on the clock and you never know when problems will arise. The most basic solution for this is to hire a property manager and be done with it. On many properties, where there is just not enough room every month, it may be difficult to justify the cost. This means that you are on call every time you go on vacation or are spending time on your business. You don’t need to drop everything to deal with a broken lock, but some problems require immediate attention and need to be dealt with as quickly as possible. This leads to another common issue with most landlords.
Unless you are the handy type, finding someone when you need it can be a hassle. Aside from the cost, you also need to spend the time to find someone for the specific task you are looking for. Ideally you will have a few carpenters, plumbers and general handyman at the ready when you need them. Even if you do, you cannot expect them to drop what they are doing to work on your clogged toilet. This requires you to spend more time searching and calling other plumbers to get what you need done. This could take as little as five minutes, but on others you could spend hours calling, leaving messages and comparing quotes. You also need to coordinate the schedule with your tenants or make a trip to the house yourself. Alone, this is not a big deal, but if it happens a few times a month it will start to be a problem.
You need to always be prepared for the worst case scenario. Simply put, this means that you need ample financial reserves to brace when big ticket items break or need to be replaced. With every major weather event or issue that comes about, you need to be prepared. Leaky roofs, broken pipes and three foot snow storms often come announced and with little time to react. If you want to keep your tenant happy and your property profitable, you need to deal with these things as soon as they come about. If you wait, you will not only make the problem worse, but it can end up costing you more money down the road. You need to condition yourself not to complain about issues when they come about and learn to deal with them quickly and efficiently.
You need to always keep an eye on your tenants and the next lease. Profitability comes down to your tenant paying their rent on time, every month. This means finding good tenants and taking care of them and the property. At about the halfway point of the lease, you should assess if they are a good tenants and if you want them back. The longer you wait to find new tenants, the more desperate you will become. This leads to taking on bad tenants or bending your rules to fill a vacancy. It is never too early to promote your property and find new tenants. Showing the property, reviewing any applications and fielding phone calls may be time consuming, but the alternative is dealing with a bad tenant down the road.
While all of these can be a pain at times, they are worth it if you find the right property and get good tenants. As long as you are aware that it won’t be smooth sailing all of the time, being a landlord can be a very profitable and rewarding experience. Having a tenant pay down your mortgage or provide you with monthly cash flow can be a wonderful thing. There are pros and cons with every aspect of investing, but in the end, the pros of being a landlord far outweigh any negatives.