You can make a ton of extra money when you’re a landlord! If you have the capital to buy an investment property and rent it out to tenants, you might be able to gain a huge additional revenue stream. Think about what you can do with the rent money you collect: you could save for a big vacation, save for retirement, or even save up to buy a second rental property.
But being a landlord can be tough work. There’s a lot more to it than just collecting rent. Before you become a landlord, you should know these important things about the job so you don’t make yourself miserable and regret your investment.
You’ll Have to Work for Your Money
A lot of people think you can just buy a property, rent it to tenants, and collect your rent every month. If only being a landlord was that easy. The truth is that there’s no free money when you’re a landlord. You’ll still have to work for your extra income, and the work entails all of the duties that a landlord is legally required to oversee.
As the owner of the property, you’re legally required to keep the property habitable for your tenants. That means that when your tenants request maintenance, you’re the one who has to call it in and pay for it. If a toilet gets clogged, you’re the one who has to call the plumber. If the air conditioning stops working, you’re the one who has to call an HVAC servicing company. If there’s a rat or termite infestation, you’re the one who has to call pest control.
And you need to respond to maintenance requests quickly. If a maintenance request goes unanswered for too long, your tenants reserve the right to withhold rent until you take care of it.
Unless being a landlord is your full-time job, you might have difficulty finding time to handle maintenance on the property. That’s when you might want to hire a property management company. For a monthly fee, a property management company will handle all maintenance requests, and they’ll also collect rent for you. You’ll lose a little money out of your pocket, but you’ll also be relieved of the maintenance burden.
You Can’t Charge Whatever Rent You Want
First-time landlords are often very inexperienced with rental pricing, and they make the mistake of charging rent that’s far higher than what the unit is worth. The truth is that you could be highly limited as to how high you’re able to charge your rent. Nobody’s stopping you from charging exorbitantly high prices, but you’ll likely have a difficult time drawing tenants to the property. And when your unit goes unoccupied, you lose money.
The amount you’re able to charge is dependent on two factors. First, your rent must be proportional to the quality of the unit. If the unit is run-down, with worn carpet and bad plumbing and peeling wallpaper, you won’t be able to draw tenants unless the rent is cheaper. Conversely, if the unit is in brand new and fairly large, you’ll be able to charge more.
Second, your rent price is dependent on what the rent prices are at surrounding properties. If the neighborhood is fairly affluent and there are lots of fun things to do, you’ll be able to charge higher prices. If the neighborhood goes for fairly cheap rent, it’ll be doubtful that you’ll be able to charge prices that are significantly higher (unless your property is valued much higher than the other properties).
You can always improve your property to draw a hire rent price. You can:
The nicer the property, the higher the rent you’re able to charge. Just be sure to learn how to calculate rent so you don’t wind up losing money on your investment.
You Can Make a Positive Impact on People’s Lives
People tend to demonize landlords, but here’s the truth: you can truly make a positive impact on people’s lives. A lot of our happiness can come from the place in which we live. Your property might just be the place where an excited postgrad rents their first apartment. Or it might be where a young family experiences the joy of watching their little one grow up. You’re the one who’s providing shelter for these people, and you can make happiness happen by charging fair rent and by quickly responding to maintenance requests.
It’s a win-win for you: you get to make a ton of extra cash, while also helping out people who need a place to live.