Are You Prepared To Be A Landlord?
Posted by David Rosenfeld on Apr 20, 2013 - 10:48:03 AM
LOS ANGELES—These days many are jumping into the rental property market. And given the recent growth of real estate in general, it’s not surprising to see this surge. The prospect of acquiring apartment buildings or multiplexes with a steady cash flow is hard to resist, some may say.
There are many things to know before becoming a landlord.
For those considering this move, it’s a good idea to go over the possibilities of owning rental property and whether you’re prepared to be a landlord. Being willing isn’t enough when it comes to being a landlord. There are many issues to be examined and questions that must be answered before taking the plunge into the market.
Being a landlord is about work and doing your due diligence and research from the beginning. From acquiring the property to screening potential tenants, it’s all about doing your homework and making sure all of your bases are covered, so to speak, in order to be successful.
First, you must screen your potential tenants, whether they’re people you know or otherwise, it’s prudent to do your research to ensure you have tenants that are able to pay the rent regularly and maintain the property in proper order. A bad tenant can cost you thousands of dollars in repair bills and lawyer’s and court fees. As they say, it’s better to be safe than sorry.
I had a tenant that decided to tear out all the kitchen cabinets and lay them in a pile in the middle of the kitchen. It cost thousands of dollars to repair that kitchen and more in lost rent payments for the time the unit was unoccupied and unusable due to the repairs.
By using a credit checking or management company, you can examine a person’s credit worthiness, whether they’ve been employed a while and whether they’ve had judgments against them. Should a potential tenant complain about the fee to check their credit, it should raise a red flag. Likewise to those who want to pay several months in advance to rent an apartment. It’s my experience that such tenants will raise questions when the rent is due again and cause additional problems.
You have to remember that tenants are not your friends. They are business partners in an arrangement that benefits you both. You can be friendly and cordial, but don’t take it personally if a tenant isn’t particularly nice. You don’t have to get along to have a working relationship with tenants. As long as the rent gets paid and the apartment is well maintained, a tenants’ attitude shouldn’t be a problem.
Another good question to ask yourself to determine if you’re ready to be a landlord is whether you’re handy with tools and repairs. From time to time, you’ll have to get your hands dirty and do some of the repairs yourself. You can also hire a plumber or electrician, for instance, but many tasks can be done by yourself such as tightening faucets and replacing a window screens. This will help you save hundreds of dollars.
You may also consider hiring a management company to collect rents and manage the property, but unless you have several units, it may prove to be too expensive. Generally, a management company charges about 10 percent of your gross rents collected, so if you have just three units, it can be costly, but if you have two buildings with three units each, it may be worthwhile, especially if you’re not particularly handy with tools.
Many management companies refuse to take on buildings with too few units, but as with most other issues dealing with your rental property, you should do your research to find the best fit.
It’s a good time to explore the rental property market and see if it’s right for you. Ask your local realtor for expert advice and whether you’re ready to jump into the rental market and become a landlord.
David Rosenfeld is a Real Estate broker and president of Advantage Real Estate, a Real Estate and investment firm in Santa Monica, and a Rotary Club member. He has more than 20 years experience in commercial and residential property investments and financial counseling. He can be reached at 310 450-4488, at firstname.lastname@example.org at www.advantage-realestate.com.