Investing in real estate is a wonderful way to create a stream of income for yourself, acquire a tangible asset to diversify your investments, and begin to build generational wealth for your family. However, being a landlord is not a hands-off job; If you want to build and maintain a successful rental property that will become a source of passive income, you have to invest time and energy as well as money. Let’s explore some of the do’s and don’ts of maintaining a successful rental property so you can continue to attract tenants and build wealth.
DON’T Be Afraid To Communicate
When you make the commitment to invest in a rental property, you become a landlord. While the prospect of collecting rent each month may seem exciting, there are a lot of responsibilities involved. For example, you must be willing to communicate clearly and expediently with your tenants to resolve issues like home repairs or other problems that may arise with your property.
No matter what, you must have the communication skills to create a positive relationship with your tenants as well as the finances to handle anything that may go wrong from a leaky faucet to a pest problem.
DO Set Boundaries With Tenants
Be sure you are properly screening your tenants to make sure they are a good fit and will be respectful of you, the property, and the neighborhood. Before the move-in date, set clear deadlines for tenants for when rent is due, and establish any grace periods or late fees you may want to enforce. Rent prices vary based on location, so make sure you research rent prices in your area to set a rate that is neither too low or too high.
Additionally, there is always the risk that you will get a bad tenant. If you have a tenant that is destructive, noisy, or consistently late on rent, it is your responsibility to handle the situation.
DO Consider Your Finances
Buying an investment property can be very lucrative when done at the right time, but you must be sure before taking the leap that you are ready for the financial commitment. You will be responsible for a sizeable down payment, as well as potential closing costs associated with the purchase.
Besides the initial investment, you have to take into account that there may be a period of time before you secure tenants where you have to pay the mortgage yourself. Make sure you have several months’ worth of cash saved in case of a vacancy. Additionally, no property is immune to regular wear-and-tear from both renters and the elements. You must have a sizable amount of money set aside for inevitable repairs throughout the year.
DON’T Stop Investing In Your Property
This is not a “one and done” type of investment; you need to be involved in order to have a successful rental property. You can’t expect to put down your initial investment and never touch the place again or you’ll have a hard time securing good tenants who stay and become a steady cash flow.
If you want to be a more hands-on landlord, consider the tune-ups and repairs you’ll need to make before your first renter moves in and between tenants. Depending on the initial state of the property, you may need to do a few small tune-ups like painting or replacing air filters, or you may need to fully renovate the place.
If you love a fixer-upper and want to invest in and renovate multiple rental properties, you should consider getting your class A, B, or C license in your state and learning a little more about the business of contracting before you jump into large home renovations. This is a route many property investors choose, and you can get a lot of joy out of being your own contractor and flipping homes HGTV style.
If you need to do a major renovation before move-in day and aren’t passionate about home renovation, some investors choose to hire a contractor rather than do major repairs themselves. Additionally, if you would prefer a more hands-off approach to your rental property, consider hiring a property manager to handle the day-to-day issues and minor tenant complaints.
If you understand the risks of investing in a rental property, you will be better prepared to reap the rewards. Make sure your finances are secure, you know how to choose the proper tenants and enforce boundaries, and you’re prepared to become a landlord before you take the leap into investing in real estate.