You know the common phrase: “you must spend money to make money.” For your financial future, it would be profitable for you to invest your extra money into opportunities that allow you to grow your pool of money in addition to your regular income. There are a variety of ways to do this (the stock market, bonds, etc.), but one form of investing that is slowly emerging and becoming a favorite among the younger generations is in real estate.
This type of investing is not without its risks of course – no investment opportunity is entirely free of uncertainty and potential peril. Deciding to invest is not a decision that is made lightly. It requires research and consulting with an experienced professional before one decides to financially commit to a certain endeavor.
Even if you have been well-versed in all that real estate investing entails, it is not something that you can be fully prepared for. Even more seasoned real estate investors may not experience some of the downfalls you may experience, as every situation is different and every tenant is unique. While it is impossible to anticipate every challenge, there are certain areas that real estate investors think are the most important to prepare for.
Before you take on the task of becoming a landlord, here are some things you can ascertain without having to learn the lessons the hard way:
Property taxes can increase drastically.
As a future property owner, you should understand that property taxes will fluctuate. However, some don’t understand quite how dramatic that fluctuation can be, specifically when the number rises substantially. Rental properties work differently than they do on homesteads, so just be aware that you can’t use the taxes from one to anticipate the other.
Bad renters can be very costly.
Even if you have not previously acted as a landlord, you have heard horror stories of tenants who have completely obliterated a property, leaving the landlords responsible to reach into their own pockets to pay for the costly, but necessary, repairs. Oftentimes, these repairs can’t even be prevented. Extreme damage can be executed in a short period of time.
Set rules and stick to them.
Since you are choosing the tenants who will occupy your space, you want to give them the benefit of the doubt and assume that they will be respectful of the property and rent deadlines. No landlord wants to be strict and demanding, yet it is important to have these rules in place. If tenants are aware of your rules at the onset, they cannot excuse their behavior on a lack of concrete guidelines. If you are too lenient or flexible, some tenants may walk all over you and cause an uproar when you attempt to put your foot down.
As a landlord, it’s crucial to your success that you prepare for the worst, even the things that are beyond your control.