Becoming a landlord is a fairly simple investment and one of the best ways to create a new income stream, but it isn't for everyone. Renting a home or even a basement apartment in your own home can be a challenge. Finding the right tenants is hard and when you have tenants, it's even more important to make sure everything in the house is kept in good condition.
On the other hand, once you've found the right tenants it's an extremely worthwhile investment—if you're going to be invested in it for a while, actually live in the home upstairs, or were able to pay for the home up front.
Anybody can become a landlord if they're willing to go through the necessary legal steps and invest in real estate, but that doesn't mean you should do it on the fly. If you're interested in becoming a landlord but haven't made a decision, ask yourself the following questions before you get started:
1. Are you going to be in the game for a long time?
If you're young and well employed, taking out a mortgage to purchase a property you plan to rent out is a great idea. You'll have a long time to earn back what you spent on it and to make a nice profit.
If you're a first time home buyer you might want to take renting into consideration and look for a home that has a built in basement apartment you can rent out. If you make sure everything in the basement apartment is in working order and kept clean, you can easily use your rental income to pay your mortgage payments and property tax so you can afford a nicer lifestyle.
2. Do you have most or all of the money you'll need to purchase a second home you can rent out?
If you're making a lot of money and you've been saving religiously or you've chosen excellent investments and have a large chunk to invest all at once, real estate is one of the best investments out there. Not having to take out a full mortgage means you can stop paying it sooner and enjoy your profits more quickly.
For similar reasons, if you decide to move to a new home and you've already paid off the mortgage on your first home, you might want to consider keeping your first home and renting it out. People always need a place to live, and renting your old home out makes it a recurring income stream, whereas selling your home means just getting a lump sum once.
3. Will you need to make any renovations to the property before you can rent it out?
If you're looking at renting a home you're moving out of because you've decided to move to a house that better suits your family's needs, is there anything that needs to be fixed before people can move in? Do you have to renovate your new home before you can move all your stuff in?
You might be in it mostly for the money, but remember that this is a place where people are actually going to live. You want them to be able to enjoy their home. Oh, and you'll be able to charge higher rent if everything is clean and in working condition.
4. How will you find the right tenants?
How much work being a landlord is depends largely on the tenants you end up with. The wrong tenants can cause all kinds of headaches, but the right tenants will be a pleasure to talk with every time you see them and provide you with a steady stream of income. Once in a while things will break no matter what kind of tenants you have, but if you have good tenants you won't be paying for unnecessary repairs or legal fees because you were forced to evict someone.
If you have any friends who are looking for a place to rent you can always talk to them, but if you don't there are several options available. You can advertise the place yourself and look for people both online and offline, or you can go to a trustworthy real estate agent who can screen all interested parties before they ever get to your door. It's all about what you want.
Investing in real estate to become a landlord is a serious commitment. It's one of the greatest investments you can make—after all, people will always need a place to live—but it's also something you have to do properly, and an investment that's usually best when you're investing for the long term.
A good real estate agent should be able to give you advice on how to go through all the legal procedures to become a landlord and help you make it more appealing so you can charge the highest possible price for rent. The best will even be able to help you find an excellent tenant so you can actually enjoy being a landlord.