Low interest rates and sinking property prices have driven many aspiring investors to jump into the realm of renting. Though the option of earning money through rent sounds easy, it is fraught with challenges like protracted vacancies, unexpected incidental costs, defaulters, refinancing troubles and overrated rental potential.
To prepare you of such associated vulnerabilities and enable you to make the profession of being a landlord financially rewarding, here is an attempt to answer some fundamental queries in an insightful manner.
You ought to treat real estate investment as a full blown business and resultantly devote optimum energy, time and concentration to make your project take off the ground. You have to religiously spend quality time surveying open houses, neighborhood, cash flow potential, and amount of renovation required in chosen property. Alongside, you should master the property management tricks, methods to deal with deadbeat tenants and accordingly enter into rewarding deals by making financially prudent offers on good quality property. You should not be tempted into less researched deals by misleading television propaganda.
You have to be really smart and discerning to maintain cordial relation with your tenants, carry out periodic property maintenance by choosing contractors offering competitive deals, make arrangements for property advertisement and leasing, paying accrued bills, insurance and file taxes. Further, you have to be ready for unpleasant surprises like fury of the elements, damaged appliances, toilet issues etc.
You should understand your motives behind plunging in real estate. If you are driven by rosy prospects of becoming rich overnight with unplanned, half-baked strategies and minimal research, you are going to repent heavily post investment. Seek the advice of a competent investment guide to make a conscious decision. Remember, you have to interact with complete strangers and maintain an affable disposition with them. You have to scrutinize them and later on may have to take recourse to evictions too.
Refrain from cutting a sorry figure of you by goofing up everything. Hire an accountant to manage finances, a good contractor to do maintenance and upkeep, and a property manager to oversee and handle the entire array of activities required to run the property on daily basis. Never shy away from keeping aside a share of the profit for such hiring.
Cheap homes may not generate sufficient revenue. You should intently study the neighborhood to read other landlords desperate attempts to attract renters, the amount of prevailing vacancies and practices like free rent being engaged by other owners in a bid to boost demand.
If you are very resourceful, you can venture. But, for average landlords, the proposition can be tricky. Apparently lucrative deals can give you nightmares later on. Management of remote properties, especially attending to midnight disasters can test the resilience of your nerves.
If not, you may be in for an unpleasant and expensive surprise sooner than later. People with poor credit record and of dubious distinction can give you a run for your money. Eviction proceedings may drag on for months and your property cannot be leased out during this time. Economic turmoil can adversely impact your budget as increasing rent may not be possible to keep up with rising expenses. Bad tenants may say you goodbye the moment you fail to implement capital changes in your property.
Lenders are disinclined to refinance investment properties. Financial institutions eye such owners as potential hazards as they can repudiate at will unlike primary residence owners.
If you are prepared to face the above mentioned challenges bravely and refuse to be delinquent, you are ready to take the mantle of a landlord.
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