There are pros and cons to investing in real estate and striving to become a successful landlord. Investing in real estate can be a profitable step in your financial status. However, you do need to look at both the pros and cons of becoming a landlord before taking the leap.
The first step to successful investing is finding the right property to invest in. Do your research of the area, local demographics, average area rent rates, available transportation, and access to shopping and other amenities.
You will also want to develop a team of people who can assist you in this venture. A trusted real estate agent can help you identify possible investment opportunities. You will also need a reputable lender, insurance agent, attorney, accountant, contractors, and possibly a manager for your properties.
You need to evaluate the pros and cons of becoming a successful landlord.
- Extra income – if you make a wise investment you should realize a profit. Your rental income needs to exceed your holding costs of the property. Holding costs would include mortgage, property taxes, insurance, repairs and maintenance.
- Tax deductions – there are several deductions an investor may be able to take on their rental properties including business deductions, property costs, depreciation, and mortgage interest.
- Appreciation and equity – over time a well-chosen property will appreciate in value. As your mortgage reduces, your equity in the home’s value increases.
- Time – You will spend a lot of time on the management of your investment property. You will need to advertise for tenants, show the property to potential tenants, screen the tenant, signing leases, collecting rents, communicating with tenants, coordinating maintenance and repairs, and possibly having to file evictions.
- Risk and Liability – there are many different types of risk and liability from complying with state and local laws to individuals getting hurt on the property. Consult with your financial planner, attorney, and insurance agent to make sure your are properly protected.
- Maintenance and repairs – ensuring the property is properly maintained and getting cooperation from tenants to access the property can be an issue. Unexpected repairs don’t seem to occur at convenient times. Be sure to have a contingency plan and a reserve fund set up for any emergencies.
- Late or missed rents – Tenants may not pay on time, or even miss their payment. You will need to have the resources to deal with the loss of income and possible legal expenses.
If you want to become a successful landlord, you will want to make sure that you are made for it. You will want to ask yourself whether you are fit to deal with different personalities from tenants. You will want to make sure that you can handle different situations effectively.
Of course, becoming a landlord could be beneficial for you. If you have the right people in the right place, you should be able to manage the investment well.