Become a Landlord and Earn Money
When thinking of ways to earn income without working by the hour, becoming a landlord often seems like the perfect option. Those who are retired can supplement their income without going back to work, and those who need extra money can get it without working longer hours or going back to school. But being a landlord is not as easy as it may seem.
Still, renting out properties can be lucrative. Here are ten tips to help you get started.
1. Be aware that financing for rental properties is much different than financing for a home you intend to live in. It requires a much larger down payment, and interest rates are usually higher. If you have a home that’s paid off, you might do better to buy a new one for yourself and rent the old one out or take out a home equity loan to purchase the property. A knowledgeable real estate agent can help you decide.
2. Look for deals on investment properties. Foreclosure sales are a good place to start. You can often find homes that have been foreclosed on in good condition for rock bottom prices.
3. Beware the fixer-upper. Buying a property that needs work might seem like a good way to get a deal if you can do the work yourself, but such properties often end up costing you more than you think. If you choose to buy a fixer-upper, be sure to have it inspected and get estimates on needed repairs (or the supplies to do them yourself) before proceeding.
4. If you want to start making money right away, consider buying a property that already has tenants. They’re harder to find than empty ones, but they are out there. Just remember that you will be required to abide by the terms of the current lease until it runs out.
5. Decide how much you will charge for rent. You need to make enough to cover your costs and make a profit without charging so much that you won’t be able to find a tenant. Consider your mortgage payment, taxes, insurance, and estimated average monthly repair costs. Then do some research to make sure your rate is competitive.
6. Decide whether or not to utilize a property manager. Hiring one will eat into your profits, but it will also keep you from having to deal with repairs and maintenance.
7. Write up a rental contract. There are contract templates available online, but it’s best to have a real estate attorney help you with this. He will know all of the ins and outs of landlord/tenant law.
8. Find tenants if you don’t already have them. Place ads in the classified section of the local newspaper, put fliers up around town, and advertise online on sites such as Craigslist. If you live in a college town (and are not opposed to the idea of having college students as tenants), place some fliers around the school to get a quick response.
9. Screen potential tenants carefully. It’s a good idea to get a criminal background check and some references. Renting to criminals or bad renters is not a good way to start out your career as a landlord.
10. Be aware of your responsibility to provide notice for such things as inspections, maintenance and eviction. The requirements should be outlined in your contract and must be in line with state law.
There is a lot involved in becoming a landlord. But it’s a great way to make money with little ongoing effort. You will have some responsibilities, but if you take the time to choose good tenants, things should go fairly smoothly.