As a potential investment property owner, the one question you may often find yourself asking is, are you ready to be a landlord?
While the idea of renting out your place and earning passive income for the rest of your life sounds great in theory, there are many crucial factors you need to consider to know whether you are truly ready.
Here are some questions you should ask yourself to determine if now is the right time for you to be a landlord.
How Strong are Your Finances?
Even though renting a place secures profits in the longer run, it requires significant financial investment upfront. This includes insurance, Merced property management fees, taxes, bills, and other maintenance costs.
It is essential to figure out your finances to know if you can consistently afford some fixed expenses after becoming a landlord, without making too large a dent in your savings. You need to analyze whether you have enough money saved up to carry out these expenses even when your property is vacant.
Will paying for two mortgages interfere with your retirement savings?
Paying for a mortgage can take anywhere between 15 to 30 years, depending upon your monthly mortgage payments, your financial planning, and other emergency expenses. Consider that you are planning to buy a new house while renting out your old one. This means you will have to deal with two mortgages simultaneously. In such a scenario, you need to see if you can afford two mortgages without dipping into your retirement savings as the second mortgage is often higher and riskier.
Can you pay the mortgage in case of a lapse in rental income?
Given the current job uncertainty in the market, you cannot guarantee the tenant’s financial stability at all times. Therefore, it is important to evaluate whether your mortgage payments are solely dependent on rental income and if you can manage for a few months in its absence.
Can you make objective decisions?
It is essential to view your rental house as a ‘rental investment’ rather than your home and make objective, unbiased decisions. You will have to avoid getting personally attached to the property and prevent your emotions from becoming obstacles to your rental business.
Tenant screening can be a daunting task, and at times, can drain your emotional energy. At times you may find it difficult to treat all the tenants equally, considering your personal prejudices. However, it is necessary to abide by the Fair Housing Act and screen the tenants without biases or discrimination. This requires an objective and unbiased outlook.
Are you prepared to handle maintenance requests?
Being the property owner, maintenance requests are inevitable. Maintenance issues can crop up frequently. You will be held accountable for repairs, and maintenance costs, including repairing the roof, air conditioner, the heaters, installing new pipes, fixing the showers, the kitchen faucets, or appliances.
You should also be ready to take care of some urgent fixes. For instance, if the heaters break down during the winters, you will have to install new ones, even if it isn’t planned in your annual budget. You cannot delay such fixes considering the tenants’ requirements, even if they cost you a lot.
Can you manage the property from afar if you move out of the town?
If you plan on renting your property and moving out of the area, how do you plan to take care of your rental home from a distance? As the owner, you are supposed to look after the bills, the repairs, and rental property maintenance. You might have to visit the house once in a while.
Make sure that you add relevant clauses in the lease and inform your tenant regarding the same.
Do you understand your legal obligations as a landlord?
As a landlord, you are required to follow the landlord-tenant laws and the Fair Housing laws. Some of the critical rules are related to the maintenance and cleanliness standards, renting the property at a reasonable rate, keeping the house safe and habitable, and abiding by the lease. You must understand your legal obligations before deciding on becoming a landlord.
Real estate investments are never easy. Therefore, you should take highly calculated risks.
A trusted property management team like the one at River Drive Properties can assist you in managing your rental investment efficiently. We have been in the property management business for over 30 years and know exactly how to manage your rental to optimize your return on investment. For more information about landlord-tenant responsibilities, contact us at River Drive Properties.