So you’re thinking about investing in an income property. Not a bad idea! Real estate is doing well in today’s market, and the immediate income that a rental property can generate will give you a nice cushion of passive income as you move forward and work to build wealth.
Still, you should probably know a few things before you go too far with your real estate plans. While being a landlord can be lucrative and rewarding, it can also be difficult and even risky. Going into your real estate investment with as much knowledge as possible will give you the best possible shot at making big profits and setting yourself up for long-term success. Here’s what you need to know.
You’ll be going a lot of work…
They call rental income “passive income,” but landlords know that being “passive” won’t get you too far in the real estate business. Buildings are physical objects that can break down over time, and staying on top of maintenance concerns is a serious workout. You’ll want to be very proactive about building maintenance and repairs, because neglected problems won’t get better on their own — they’ll only get worse, and eventually cost you even more money to repair. Serious problems could even threaten the very structure of the building itself.
On top of the regular maintenance, you’ll have to respond to tenant requests (it’s a legal obligation in addition to being the intelligent and moral thing to do). You’ll have to make sure that you’re collecting rent and balancing your books. And that’s after you get a tenant — before that, you’ll have to work hard to advertise your property to the right tenants, screen applicants, and choose tenants who you can be confident will treat the property right and pay rent in full and on time.
Then there are tax concerns, zoning and building codes, and more. It’s a lot of work to be a landlord.
…But you won’t be on your own
Still, you don’t have to be everywhere at once to succeed as a landlord. With smart outsourcing, the right team (whether they be in-house or outsourced), and the right technology, you can get more done without going insane.
Technology has given landlords some very powerful tools. Modern landlord software makes it easy to post attractive rental listings online (and that’s good, because the internet is where modern renters go to find their next home) along with free rental applications and more. When would-be tenants apply, you can use your landlord software to do free tenant screening. With the right checks and screening processes, you can be more sure that you’re renting to reliable, trustworthy folks who can afford the rent.
Technology can also help you find the right contractors for maintenance and improvements. Want to reach the local experts? Want to get a quote so that you know the cost of a metal roof? There’s sure to be an app for that. Apps make it easy to summon contractors when you need them.
You may also want to rely on trusted experts for recurring outsourced services. You may only need a one-off job on your building’s roof, but janitorial services and basic maintenance services are more of an everyday thing. Sign a long-term deal to net some savings. You should also consider getting an attorney and a tax professional in your corner, so that you can be sure that you’re following relevant laws and maximizing your tax efficiency without drawing the ire of the IRS. A number of tax deductions are available to landlords, and getting them all can make a big difference.
Would-be landlords need to recognize what they’re getting into before they buy their income property. But they should also know that they’ll have a lot of experts and resources to rely on in their new position. You can do this!