It’s a good time to be a landlord. Since 2007, the number of renters nationwide has steadily increased. With housing prices still high, people won’t stop renting anytime soon. Combine the demand for rental units with the chance to earn passive income, and residential real estate becomes a solid, rewarding investment. But landlords don’t just sit and let the money roll in. You’ll need to do plenty of research before even buying a property. You’ll also perform continuous maintenance, keep up to date on housing law, and balance tenant satisfaction with your own needs. Being a landlord will keep you busy!
For long-term savings, property purchased wisely can’t be beaten. The rent you receive supplements your monthly mortgage, and possibly other expenses. Your rental property’s also ideally appreciating in value over time.
As a property owner, you’re eligible for tax benefits. You can deduct depreciation costs, property management expenses, and insurance, among other expenses. (Make sure to keep accurate records.) The money you earn—and save—over time can help you achieve financial goals. Day to day, the revenue stream helps out, too. Landlord Holly Johnson, who’s owned two single-family rental properties for a decade, plans to save rent money for her children’s college education and her own early retirement.
Tenant problems are your responsibility 24/7/365. Flooded apartment? Complaining neighbors? You’ll get the call. You can hire a property manager to assist with the maintenance work, but you should be on top of the situation, too. You need a calm and level head. Not to mention a thick skin—when the time comes to evict a tenant who can’t pay, you have to act as a business owner.
“The truth: It’s actually been a lot of work,” says Johnson of her rental properties. “For example, we’ve spent far too many weekends painting and cleaning our properties in between tenants. We’ve driven to and arranged countless meetings to discuss remodeling projects and repairs. We’ve had to deal with a whole host of random issues such as late rent payments, feuding neighbors, and secret pets.”
And even when tenants move out and you have vacancies, you still need to pay the mortgage. Ultimately, the financial risk is yours. Here’s how to make the investment worthwhile.
Investing in real estate can be profitable, but it’s not the get-rich-quick play sold by some books and TV infomercials; it takes know-how, capital, and a lot of hard work. Successful real estate investors aren’t just good at spotting deals, they’re comfortable with working with a team of realtors, mortgage brokers, property managers, lawyers, and others to run what is essentially a part-time business.
Ultimately, the more work and effort you put into choosing a property to buy, finding tenants, and improving your property, the more profitable you’ll be as a real estate investor. Being a successful landlord is an investment of time and money. But if you stay on top of things, you’re more likely to reap large returns.