Essential Steps to Becoming a Good Landlord

Investing in rental property is an increasingly popular source of passive income.

But becoming a landlord requires research and preparation, as with any investment. It isn’t risk-free and can come with plenty of hidden costs. It is vital that you consider the pros and cons when deciding whether investing in real estate is the right decision for you.

What to Expect?

Being a landlord requires everything from maintaining your rental property to being prepared for it to sit without tenants for periods. As with any property, your rental property requires upkeep. From repairing the boiler to redecorating, these tasks and costs fall to you. Depending on your skillset, this might be easily manageable. 

If you’re particularly handy and able to carry out most of the maintenance yourself, you will save yourself a great deal on upkeep fees. However, you will need to factor in the time you commit to looking after the property. Can you manage regular maintenance alongside your day job?

If not, you need to think about the required spare cash to regularly pay a team of plumbers, builders, and cleaners. There are further costs involved with buying a second property. It is advisable to invest in landlord insurance that can protect against loss of rent, against emergencies and landlord’s possessions, such as white goods. 

You also need to be prepared for making a loss on the property. Depending on demand, your house may stay empty for periods, meaning you spend money on upkeep, insurance, and your mortgage without any return. Before deciding to invest in rental property, make sure you have a cushion to fall back on should you lose rental income at any point.

Finally, you might be wondering about what happens to the house if you sell it in the future. When purchasing your property, ensure that you consider how the value might be affected over time and whether it is a good investment in the long run.

Location

If you have decided you have what it takes to be a landlord, the next step is considering where you want to invest your money. The first step is to decide on a good neighbourhood with schools and a thriving job market. Depending on what kind of tenant you want to attract, you need to make sure the area suits their needs.

If you think you can carry out the repairs and maintenance of your property yourself, you will need to think about purchasing somewhere local to you. The other benefit of investing in your local area is that you are already aware of factors that may affect the property’s value over time or impact your tenants. For example, if you know a new apartment complex is in planning next door to the house you’re interested in, you might consider how this will affect your tenants and your own property’s prospects.

Another point to consider is whether you are buying in an up and coming area. You don’t want to buy a property in a hugely expensive area, nor a really cheap one. It is best to opt for the middle ground that will appreciate in value.

What to Buy?

So you have prepared yourself for the responsibility and settled on your location, now you need to decide what kind of property you want to buy. One of the big decisions to make is whether you want an apartment or a house. Each has its benefits. One of the things to consider with renting out an apartment is any hidden costs that come with it being within a strata unit. Apartments are often easier to rent out than houses but have a higher turnover of tenants.

It might be tempting to buy the cheapest property on the market. However, remember that this might come with extravagant renovation costs. Unless you have spare cash, it is best to keep your start-up costs relatively low until you begin to make a return on your investment.

If you are interested in buying a fixer-upper to renovate yourself, there are ways that you can makeover on a budget. Investing in a rental property for the first time can be challenging. Yet, with the right expectations and preparation, you will be a landlord in no time.