Many people think about becoming a landlord as a way of investing for their future. Others become accidental landlords when they can't sell their home, or because they have to move for work but want to retain their property. It's not a simple matter of finding tenants and waiting for the money every month, though. A landlord has many responsibilities, and there are many potential pitfalls. Here are some essential points to remember if you're considering becoming a landlord …
1. It's Not Easy Money
If you're thinking of becoming a landlord, don't think of it as an easy route to earning money. There are a lot of things you need to take into account and be aware of. Landlords who expect to sit back and watch the rent cheques come in every month will soon find themselves proved wrong. There are legal obligations and risks involved, which could cost you a lot of money.
2. Who Will Manage the Property?
If you live a long way from the property that you're going to rent out, you'll have to appoint an agent to manage the property for you. They will charge a monthly fee, which eats into your profit. Managing the property yourself means that your tenants could call you at any time of the day or night; you'll have to deal with any emergencies that arise.
3. Learn about Your Obligations
It's essential to know what your legal obligations to your tenants would be. For example, to what standard are you required to maintain the property? How would you have to go about ending the tenancy? If you make a wrong move, it could be a very expensive mistake and leave you open to legal action, so educate yourself on your obligations as a landlord.
However nice you think your property is, there may well be times when you find yourself without tenants. This could be because they move out at a time of year when other people aren't as likely to be looking for a rental, or because of competition in the market. Could you cope financially if your property remained empty for a time?
5. Where & What to Buy
There are a number of factors to consider when choosing the area in which to buy, and the type of property. Are there university students in the area, or young professionals? If you can only afford a small apartment, is the rental market strong for those, or do people prefer family houses? What will your budget allow you to buy?
6. Be Prepared for Potential Problems
Landlords should always be prepared for possible problems. The property will need maintaining and repairing. At worst, the tenants could trash it or there could be a fire. You would then need to deal with insurance companies and builders. If your heart sinks at the thought, don't be a landlord. There could also be legal and financial issues if the tenants don't pay.
7. Treat It as a Business
Landlords renting out the family home can find it very difficult to let go of their emotional attachment to the house. But it's important to see being a landlord as a business. You must be very thorough in maintaining paperwork, organising repairs and dealing with your legal responsibilities.
Obviously this isn't a thorough guide to the stages of buying a property, but if you fancy yourself as a landlord it should give you some factors to think about. Being a landlord is not an easy prospect, or the route to instant riches. However, there will always be a rental market, so with a cool head you may be a successful landlord. Have you had any disastrous renting experiences?