Owning real estate is one of the sure ways to create wealth over time. Sure, there are valuation blips along the way but overall real estate can be a good investment. It’s a physical asset, unlike say a stock being traded on Wall Street. And while you may not be able to hold it in your hand like other physical assets, you can certainly drive by and take a look when you’re in the area.
But owning rental property also means you’re a landlord. Are you ready?
Many who are first time landlords often do so by accident. In this fashion, they buy a home, live in it and later decide to buy another place in which to live, keeping the previous property and renting it out. When renting a unit, it typically means not only owning an asset that appreciates over time but also creates a monthly cash flow. Such situations mean the rent being charged is more than enough to cover the cost of any home loan along with associated property taxes and insurance. Not a bad deal. Can you think of any other hard asset that can make such claims?
But to be a landlord, that also means you have to have tenants, right? Here’s where the due diligence begins to come into play. You’ll want to make sure the prospective tenants complete an application along with permission to run a credit report. By reviewing the application, you will have information regarding the previous landlord in addition to a credit history. Those with a responsible credit history will likely make for good tenants. ‘Good’ also means paying the rent on time. Those with a relatively clean credit report who have demonstrated the ability and willingness to repay credit obligations should also pay their rent on time. Plus, by contacting the landlord, you’ll get verified third-party verification of a good tenant.
Finally, one responsibility will be taking care of tenant issues. Let’s say you’re out at a nice restaurant and having a pleasant meal. Suddenly your phone goes off and it’s your tenants telling you the hot water heater has sprung a leak and there’s water all over the garage floor and driveway. Guess what? It’s time to alert your waiter that you need to cancel your order and skedaddle. To avoid such instances, you can always hire a property manager. A must-have if you own more than one rental unit. Your real estate agent can hook you up with an experienced and responsible manager.
