The number one reason I hear for not investing in rental properties is becoming a landlord. So many people have a fear of being a landlord. I personally don’t know where this comes from, but it has a lot to do with an individual’s personality. Real estate is the most convenient way to make a lot of money and grow your wealth because it doesn’t take much talent, just some people and managerial skills. I want to talk about 3 separate but equals parts of being a landlord: dealing with tenants, being organized, and managing a property.
Dealing with tenants. This is more than likely the part that people fear the most. Kris and I have had about 10 tenants in roughly 2 years. Yes, it can be a headache. Dealing with other peoples’ issues can wear you out and affect your own mood. However, as you gain more wealth, these problems seem less and less detrimental to your psyche.
Tenants are like dogs, they smell fear. If you are scared or timid, they will march all over you. If the rent is past due, and you don’t call them immediately, I can promise you that they will be late next month. They are waiting for you to put your foot down. They will not respect you if you don’t respect yourself.
I personally have never had any issues with this. Quite the opposite actually. Kris sometimes has had to tell me to “be nice”. However, I have been a Marine for 22 years. If you let your boss punk you out in Marines, I promise they will make your life hell for a very long time. I have learned the art of “direct confrontation”.
If this is not something that appeals to you, then there are other ways to get into real estate. However, you may as well learn how to confront people. What are you going to do when your child is getting bullied at school and you have to confront the parents? What about a boss who is harassing you? Being able to solve your problems through peaceful, but direct, confrontation is a great skill that most people lack. It has served me well, and it will do the same for you.
Being organized. Being a landlord is not a job where you can be a screw-up. How can you collect rent if you don’t know when it is due? How can you get an air conditioner fixed if you don’t have the number to the A/C person? Your tenant is relying on you to have the answers. If you don’t, it is okay as long as you can find them, immediately. Your success as a landlord depends directly on you.
You need to be able to collect security deposits and know how to control them. If you collect the first and last month’s rent, you need to remember that when the person leaves you won’t get a final rent payment. You need to have an emergency fund set aside for emergencies. I would say at least the cost to repair an air conditioner. It is okay if you don’t have it right away, but you need to have a plan to pay off a credit card if used.
More than anything, you need to be cool under pressure. This comes from being organized and having a game plan. Each home that you own is its own separate, and unique, property. By staying organized you will know the date of the roof and air conditioner, the termite service schedule, when HOA payments are due, who takes care of the lawn, etc… It is really not difficult, you just have to take it seriously.
Managing a property. This goes beyond being organized. In the business world, they have a term called “capital expenditures”. This is when you re-invest profits into the business in order to gain more profits. As a landlord, you also need to think about this.
Some things will be mandatory, like changing carpets or cleaning the air conditioner vents. But what about upgrading to hardwood floors, renovating the kitchen, or adding a whirlpool tub? You may also need to update appliances or add a washer and dryer. Some of these things will not be required, based on surrounding rentals, but you have to at least keep abreast of changes around you.
Capital expenditures are a great way to add value and ensure your rental gets the full asking price. As much as we love to collect our profits from rentals, we also need to re-invest back into the property. This also helps if one-day we, or our family, need to move into the home.
There is nothing inherently difficult about being a landlord. If you are a good employee or manager, then those same skills will crossover to being a landlord. You will be the manager of the house, however, your tenants’ needs will be equal to yours.
Do not let the fear of being a landlord prevent you from collecting that sweet, juicy rental income. Real estate is truly a wealth-building tool, and part of owning real estate is managing property and tenants. Accept this fact and prepare yourself to get it done.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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