Do you have what it takes to be a landlord?
People often call and ask about investment properties, they want to purchase a cheap house and rent it. Most people will have a very romantic view of rental property, they think they are just going to buy the house, put a sign outside and in a couple hours the tenant will be there ready to get in and pay the rent month after month without a hitch.
Reality check:
1. Affordability. You have to see how much you can afford for downpayment AND how much money you have to clean up and fix the property PLUS at least 3 months worth of mortgage payments as a cushion. Why? See #3.
2. Now you have the house ready and all that. How much you are going to charge for rent? Well, it all depends on the area where the house is located, you can't charge more rent than the surrounding properties. Don't get me wrong, you could but the chances that the property will be empty are huge so don't make that mistake. Then again, you have to be sure that the rent payment will cover the mortgage payment, taxes (which will be assesed at a higher rate because it is an investment property, at least in SC, so check in your state) and insurance. It is also a good idea to factor a Property Management fee why? Well, later you might decide that it is a better idea so it's good policy. Also, you need to factor the repairs that might be needed so, build a cushion.
All these little itty bitty things are common sense and will help you also choose the right property in #1.
3. Finding the right tenant. Sheez, that's a loaded question. You have to adverstise, check references and credit, why? because is a good policy and will give you a peace of mind. But always, always talk to them, meet them, there is the GUT factor, if you don't feel good about them , run because you will have to deal with them for a long time.
4. Collecting rent. Are you strong enough to tell somebody to move out? If not, hire a Property Manager, don't even think it twice. This is the hardest part of my job, telling a young mom that she is going to be evicted and better find a way to pay the rent. NOW!.
5. Finally, get familiar with your local laws, google landlord tenant act for you state and be sure to follow the law.
And if you have a good property and can't handle it anymore, hire a good Property Manager, who can take good care of your property so you can rest and get the most out of your investment ;-) and you dont get to be the bad guys.
One of the best ways to acquire rental property is buying foreclosures, you will have to rehab and recondition but with good information you will be able to create a rental portfolio soon enough
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