What to Consider When Becoming a Landlord
Becoming a landlord can be rewarding, but it also comes with significant responsibilities and considerations. Learn more.
The housing market is becoming one of the most sought-after investment options. It may be time to consider if you are cut out to be a landlord.
More and more Americans are seeking investment opportunities. Due to recent fears of inflation, many investors choose to purchase assets rather than invest in the stock market. As the real estate market continues to grow, it is important to know if real estate is the best investment for you.
Decisions to Make Budget
In order to prepare for this investment opportunity, consider reviewing your finances and see what your next move should be. Consider meeting with a mortgage agent or investment specialist to see what will work best for you. Know what you need to do before applying for a home loan. Study the current real estate market to learn if now is the best time to invest. Investment takes time and strategy, be sure to gather advice and then decide to make your move.
After your affairs are in order, select which form of rental property you will offer. Providing housing for renters can take place in many forms. Some homeowners may convert their garage or basement into a small apartment. Also, they may choose to build an Accessory Dwelling Unit (ADU) to rent out. An ADU is typically a smaller, independent residential dwelling unit located on the same lot as a stand-alone (i.e., detached) single-family home. These on-property rentals are often equipped with a kitchen, full bathroom, and a private entrance. Adding these amenities will increase revenue opportunities as well as the overall value of your home.
There are other methods to invest in real estate if you are not wanting to rent out space in your personal residence. Consider not selling your previous home and rent it out. There is also the option of buying a cheaper home that needs some work to get it “renter ready”. For instance, fixer-uppers can be a smart option if you are seeking an affordable investment. This investment will require lots of work upfront but will accommodate a lower budget. If you do not have the time or resources to fix up a home, seek out homes in strategic locations that are ready for renters. By choosing a valuable location in high demand, you should have no issue finding renters.
There is also the decision of how you want to earn your revenue stream. Renting out housing does not need to be long-term. Many landlords may decide to use a vacation home or a strategically located apartment to rent out for short-term vacations. Services like AirBnB or VRBO allow property owners to rent out their vacant housing for only a few days at a time.
Going beyond rent, there are other opportunities to increase revenue. For long-term renters, landlords can also add streams of revenue by offering landscaping and cleaning services. The same method can apply for any other type of service such as a house cleaner or cleaning overhaul.
There are many responsibilities that come with becoming a landlord. The most important step of real estate investment is calculating what costs are involved with renting out property and what to charge tenants for rent. An easy jumping off point for setting rent comes from comparing rent prices of neighboring units. Checking out Zillow, Craigslist, and Rentometer can help in finding a favorable rent price. Depending on local legislation, landlords may also raise rent costs to maintain income margins as inflation fluctuates. However, rent increases can result in the loss of a tenant if not raised properly.
Landlords are also responsible for finding tenants. Whether through word-of-mouth or the internet, landlords need to find tenants to start making income on their investment. In order to find the best tenants, you must have an understanding of the unit’s local real estate market. Some landlords opt to hire a property manager to help bring in good tenants.
As a landlord, you wear many hats. To cut down on costs, many landlords also serve as the rental unit’s “handyman”. These maintenance responsibilities can span from fixing plumbing issues to electrical issues. If you are not very handy, compiling a trustworthy list of contacts will help with any future maintenance need. Factoring maintenance and general upkeep costs within the rent amount will help cushion the costs of hiring help.
If you find the time spent on landlord responsibilities costs more time and money than it’s worth, consider hiring a property manager. Property managers can range from an individual who maintains only one or two properties, to a property management company that services entire complexes or buildings. Their responsibilities include filing maintenance requests, overseeing security, and managing the general needs to preserve the value of the property.
The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its subsidiaries and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.