While rental houses are a great line of business to get into in order to make consistent cash flow and long-term wealth, there are a few things to consider before jumping into the fray. This is particularly true if you are considering managing them yourself. There are all kinds of reasons that rentals are a good, solid investment for most that are interested in investing in the real estate business. However, it doesn’t come without a few drawbacks, not all of which are financial. It would be wise to consider these things however before you buy your first rental property.
Don’t Fall Into Management “Slavery”
You will probably elect to manage your first few rentals yourself unless your first property is multiple rental units. Thus, you will quickly discover that your life is no longer your own. You are literally on call 24 hours a day 7 days a week to handle problems that may arise from pipes bursting, heating going out, electric issues, noxious fumes, leaky roofs and window sills and countless other complaints that may erupt at odd hours of the day or night. Your tenants will have your phone number and expect you to always take their calls. This scenario happens to most amateur landlords who don’t take the time to plan out their business model.
Here are a few suggestions to avoid this headache:
1. Encourage tenants to email you unless it is an emergency
2. Don’t give you your home or cell number. Instead, give out a voice mail for tenants to call that will forward a message to your email.
2. Have a handyman on call for emergency issues
4. Have a clause in your lease that allows them to deduct rent if a repair is done fixed with X days after a call or email is left by tenant. That way, the tenant won’t keep complaining, in fact, he’ll be HAPPY to pocket a few days of rent!
Be “Mr. Nice Guy”
You don’t have to be nasty or scold tenants who don’t pay rent. Be nice, be lend an ear to their problems, but whatever you do, keep the legal process going. You can serve a notice of non-payment and start eviction and tell them you are sorry, but it’s your job to post notices. But don’t get nasty with them in the meantime and don’t let their sob stories delay you from doing your job.
Don’t Let Them Know You are the Owner
I often recommend using a land trust to own title to your rental, thus you are just the “property manager”. The dynamic is completely different when they think you are a working slob like them, not the “greedy landlord”.
Inspect Your Properties Often
You should physical inspect your properties at least once, if not twice a year. Change the furnace filters, check the smoke detectors, and have a look around. While some tenants will complain about any little repair needed, many will let the problems pile up and cause long-term damage to your property. Getting your eyeballs on the house from time to time will help you avoid such a mess.
Owning rental property can be financially rewarding but it is a lot more work than many people give it credit for being in light of other careers within the real estate investment field that may require more work upfront. Rental properties require a long-term commitment to keeping the property in good working order and making it a profitable venture for many years to come. If you are considering this business and the above things are a deterrent for you it might be a good idea to obtain the services of a property manager.
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Attorney William ("Bill") Bronchick, host of Legalwiz.com, has authored six best-selling books and is sought nationwide for his 25+ years of real estate and legal knowledge. He has been interviewed by numerous media outlets, such as CNBC, TIME Magazine, USA Today, Investor Business Daily, Forbes, and the LA Times, to name a few. William Bronchick is the co-founder and past President of the Colorado Association of Real Estate Investors and the Executive Director and founder of the College of American Real Estate Investors. Click on the "About" link above for more information on William Bronchick.