Owning a rental property appears, in many ways, like a great venture, especially when it comes to building wealth over time. While most people do have the means and capability to do venture down the road of becoming landlord, it may be more work than many expect.
If you're thinking of becoming a landlord, consider these points (many of them inspired by Zillow) before you get yourself into something that can be time consuming, stressful, and potentially detrimental to your finances.
1. You'll have to fix things. A lot.
If you aren't a fan of weekend or late room calls asking you to come fix a busted furnace or deal with a clogged shower drain, investing in a real estate property may not be the best option for you. One-hour fixes are lucky fixes at best, and many times you may have to call in professionals to assist you - which you'll be paying for.
Make sure you're willing to spend some of your free time - and this means Thanksgiving, Christmas, Super Bowl Sunday, and any other time of day or night - being able to come and fix problems that your tenants have.
2. You'll need to have some free time to begin with.
If you're someone who works excessively busy work weeks (read: 60+ hours a week), and/or you have kids, and/or you are managing a business, investing may not be the best call for your lifestyle. Properties often need some TLC. Yes, sometimes you get lucky, but it is definitely the exception to the rule when this occurs. Zillow says landlords should expect to be called to a property usually around 4-6 times a year if not more, and some of these times will be very time consuming.
In short, if you feel you're a relatively "busy" person, real estate may not be the best idea for you.
3. You'll need to have some savings to dedicate to the property.
Rental properties don't exclusively accumulate income. You'll need to have a solid amount of savings in store for emergencies that occur at your property - like that $2,000 plumbing disaster with your dishwasher, or water damage from a failed sump pump in the basement. Don't bring on the stress of a rental property if you don't have the finances stored away for these circumstances.
4. You'll need to work with others.
Landlording isn't a good venture for those who aren't willing and able to create good relationships with their tenants - remember, your tenants are your customers! Is the customer actually always right? Maybe not, but you have to address the needs of your tenants respectfully, reasonably, and with timeliness. If you don't feel like a good social and patient negotiator, we'd recommend you decide against becoming a landlord.
5. You'll need to understand the law
Being a landlord has a number of legal implications, as Randy Weinstein recently outlined for us in How to Avoid the Legal Pitfalls of Being a Chicago Landlord. Of course the rules, guidelines, and law vary state-by-state and municipality-by-municipality. Did you know that Chicago landlords need to re-key the locks every time they have tenant turnover. Makes sense, but its also the law. Improperly holding and reporting on a security deposit could result in you owing your tenants (and their legal council!) a lot of money.
In short?
If you're ready to deal with extra work, give up some of your free time, invest some of your own finances in the property, and deal with maybe some not-so-pleasant tenants, then you may be ready to become a landlord. If not, seriously consider whether or not the gain would be worth the added difficulties landlording will add to your lifestyle.
Questions? Don't hesitate to send us an email or give us a call!
