Are You Cut Out to be a Landlord?
Often, when we think about making real estate investments, we focus on the potential financial costs and gains. That makes sense, because it is, after all, an investment. But, in reality, that’s only part of the picture—because investing in properties is different than buying stocks. You must be attentive to your property investment, and that requires time, energy and know-how.
Unless you are exclusively flipping houses, you must be a landlord. Are you cut out for that? Take a look at what it is required of most landlords and decide for yourself.
This is a great exercise to determine:
- If real estate investment is for you.
- What kind of real estate investor you want to be.
Of course, if you are investing, you already have a modicum of financial awareness. But, we’re talking about understanding the hidden costs of being a landlord:
- Increased insurance. Rental homes cost about 25% more to insure than primary residences.
- Advisement fees. As a landlord, it’s important that you have a lawyer, accountant and other relevant professionals to help you ensure that you are properly going about your investment. You’ll need to pay these professionals.
- Maintenance and care. It’s impossible to know exactly how much a property will cost you in maintenance and upkeep, but it’s important to be able to come up with your best estimate.
Don’t like dealing with people? Well, that could hamper your ability to be a good landlord, which will in turn, guarantee that you’ll have more “problem” tenants than most. One of the most proven methods of protecting your property investment is ensuring you have tenants who care about the property. A good relationship with your tenants is more likely to inspire stewardship in them.
You can have great people skills and still not be very organized. If that’s the case, you risk inadvertently frustrating your tenants or other investment partners. A good landlord is responsive and consistent in their activities and communications—without being overbearing. At the foundation, that requires organization.
How much time do you have to dedicate to your investment, really? This should inform your investment strategy. Property investment can be stressful at times; don’t make it more so by not being realistic about the time you can give to it.
We talk about this a lot: for many, real estate investment involves some level of passion. Do you like architecture, design and/or making old things new? Do you like the idea of improving neighborhoods and the local quality of life? Do you like the real estate industry or the nature of property investment? Do you like the idea of having more control over how you invest your money? If none of this sounds appealing, you may want to think more about why real estate investment is interesting to you. If even just some of it sounds appealing, then you are on the right track!
Of course, a property management company can help you with each one of these requirements (except the passion). Remember that as you think about what kind of landlord you want to be, because there are ways to be more organized, have more time and manage people. You don’t have to do it all, but you do need the means to get it all done.