The dream of rental income as a passive income is a tempting siren song for many. Steady stream of cash flowing in, a little nest egg growing with each passing month. But being a landlord isn't quite the sunshine and rainbows some may paint.
Here are 5 realities seasoned landlords wish they'd known before diving in:
1. Tenants Make or Break You (Stats Don't Lie):
A National Apartment Association study found a whopping 11.6% of renters pay rent late at least once a year. That's a significant chunk of your income potentially up in the air. Finding responsible tenants who treat your property with respect is paramount. Develop a bulletproof screening process that goes beyond credit checks – think references, past rental history verification, paying for a background check and following up with previous landlords.
2. Vacancies Are a Budget Drain:
According to Apartment List, the average national vacancy rate sits around 5.1%. Even a short vacancy can disrupt your income flow. Factor in realistic vacancy periods when calculating your returns. Unexpected repairs or tenant turnover can significantly impact your bottom line. Consider offering competitive rent or signing longer leases to incentivize good tenants to stay.
3. Maintenance is a Money Pit (But a Necessary One):
Sure, you budgeted for the new roof. But what about the surprise plumbing issue or malfunctioning furnace? The reality is, unexpected repairs are part of the life of a landlord. A survey by RentalCafe found that on average, landlords spend 10-15% of their gross rental income on maintenance annually. Budget for preventative maintenance too – it can save you money in the long run by catching small issues before they become major problems.
4. Landlord-Tenant Laws: A Labyrinth You Need to Navigate:
Every state and even some municipalities have specific landlord-tenant laws. Failing to understand these legalities can land you in hot water. Eviction procedures, security deposit deductions, and renter's rights are some of the big items to understand. Consider consulting a lawyer or joining a local landlord association to stay informed.
5. It's Not Passive, It's People Management:
Being a landlord requires strong communication and interpersonal skills. You'll be dealing with people's needs, concerns, and sometimes emergencies. Responding promptly to issues fosters trust and prevents small problems from snowballing.
The path to successful landlording is paved with preparation and knowledge. By understanding these often-unmentioned realities, you can make informed decisions and navigate the inevitable challenges. Remember, a little planning goes a long way in ensuring your rental property becomes a source of steady income and not unexpected headaches.
Hiring a great property management team is another option to explore. Letting them handle the day to day headaches and tenant issues can make your experience more enjoyable.
If you have questions or would like to discuss property management services for your investment property, give us a call at 443.252.3385 or email us at info@bluedoor-pm.com today!
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