Are you thinking about buying property to rent out? Real estate is a profitable industry, so you’re definitely on the right track. It’s not hard to find success in this industry, as long as you’re prepared to handle some of the unique challenges that come with the territory.
Here are some of the most important considerations to make before buying your first rental property.
1. You’ll want a property manager
You’re in for a big shock if you’ve never rented property before. Being a landlord is extremely hard work and it’s not going to be fun. Unless you feel like you were meant to be a landlord, it’s a task better suited for professionals.
What kind of services do property managers provide? That depends on your needs. Green Residential, a trusted Austin property management company, offers full-service packages and individual services based on what each investor needs. A great company will let you choose what you need and will customize its services.
When you hire a property manager, they’ll cover everything for you, including collecting rent, conducting background checks, serving notices to tenants, handling repairs, and some will even manage your finances for you.
You’ll spend a lot of time managing your properties, so if you aren’t up to the task, hire it out.
2. You’ll spend up-front time and energy
It will take time and energy to build your investment portfolio, but you can also expect to spend quite a bit of time setting up rental properties. Unlike a house you buy to live in where you can put off some repairs, you can’t do that with rentals.
Your properties will be required to meet certain housing standards, and you’ll need to provide tenants with things like hot water, heat, and habitable living conditions. If there are any rodent or insect infestations, roof leaks, plumbing issues, or sewer/septic problems, you’ll need to fix them before putting your home on the rental market.
3. Marketing expenses are real
You’ll need a plan for advertising your rental properties, which may cost you a small amount of money. There’s nothing wrong with using free sites to post listings, but you’ll get a better pool of prospective tenants if you go with higher-quality listing services.
If you don’t plan on marketing, you’ll probably have more (or longer) vacancies than you’d like.
4. Repairs, maintenance, upgrades, and renovations
That $2,500/month in rent sounds like an excellent source of income. If your mortgage is only $2,000, you’ll get $500 per month. However, be ready to spend those leftovers on repairs and maintenance.
It will only be a matter of time before something will break down or require your attention.
5. Tenant conflicts will happen
Every landlord has to deal with tenant issues at some point; it’s an unavoidable part of owning rental property. Be ready for this situation. Most problem tenants will show red flags early, so pay attention and don’t brush them off. The majority of tenants don’t create problems for their landlords, but it’s always a possibility.
6. Evictions are sometimes unavoidable
Evictions are one of the most dreaded situations a property owner can face, but sometimes they’re necessary. Nobody likes the idea of kicking a tenant out, but if they’re violating their lease, causing a major disturbance, threatening someone, or causing damage to your property, it’s in your best interest to evict them.
According to Eviction Lab, which tracks evictions in just ten states and 34 cities, there have been more than 2,558,000 evictions since mid-March 2020. That’s a lot of evictions. You might find yourself needing to file one, too.
The main issue is that tenants don’t always leave when asked. You might serve a 3-day eviction notice and watch the tenant camp out for the next month without paying rent. In this case, the only way to get them to leave is to file an eviction lawsuit. If you win, they’ll be legally required to leave the property; if they don’t, you can have a Sheriff escort them away.
7. Tenant emergencies happen
You may not like being called at 3:00 a.m., but it’s going to happen. Tenants will have emergencies from time to time. Be prepared for this situation, but know that when you hire a property manager, they’ll take care of all your tenants’ emergency needs.
Real estate is hard work, but it’s worth it
Everything worth pursuing takes hard work. If you’re thinking of becoming a property investor, you’re looking at a profitable industry. Just be sure to keep these considerations in mind so you’re prepared to handle your responsibilities.