If you’re curious as to whether you’ve got what it takes to be a landlord today, you need to understand the role and responsibilities so you can judge for yourself. It’s not all positive but it can be very rewarding!
When the topic of owning income properties comes up, people tend to fall into one of two camps.
The first side thinks that owning income properties is a tremendous headache. “Why would you want to do that? Do you want calls from tenants at 2 am when the toilet is broken?”
People with this viewpoint focus on the negative aspects of owning an income property. Concerns about tenant issues, being paid (either on time or at all), property damage, neighbour issues, expensive repair costs, market crashes and so forth are all they can think about with income properties.
The other side of the coin thinks that owning income properties is a way to build a foundation of wealth for their future.
People with this viewpoint focus on the positive aspects of income properties. Mortgages being paid off bit by bit each month, passive income streams coming in from good people who are renting out the property, market appreciation adding even more value to the home over time.
As with many things, neither side is 100% accurate.
It is very possible to have a bad experience with income properties and it’s very possible to have a great one. It all depends on three factors.
First and foremost, being a landlord is not for everyone.
The reality of being a landlord is that you’re dealing with people on a business level. Your tenants are not your friends but rather your customers. You’ve agreed to provide a product (the home) for an agreed upon price (the rent) and both sides have obligations on an ongoing basis.
As with any business relationship, particularly ongoing ones, there is bound to be the occasional difference of opinion or bump in the road.
The most successful landlords understand that tenants will likely never be 100% satisfied with the home or the value they are receiving for the rent they are paying. The majority of tenants are renting due to circumstances and not by choice. As such, there is a natural tendency to want more for less. While this may be understandable, as a landlord you will need to be at peace with walking the line between being a responsible, reasonable property owner and giving away the farm.
If the thought of a tenant asking you for a change to the agreed upon terms (such as paying rent late one month) or improvements to the home at your cost fills you with anxiety, being a landlord may not be the best fit. Such interactions will take place and you need to be comfortable operating a business in order to be comfortable being a landlord.
The second factor that dramatically impacts your experience as a landlord is the team of professionals with whom you work.
A mortgage broker that understands income properties and has relationships with lenders who like that sort of business can mean the difference between a mortgage structured to best provide you with flexibility and options down the road and a mortgage that prevents you from dealing with any issues or growing your portfolio.
A Realtor with experience in buying, owning and selling investment properties is the second crucial team member you need. If you work with the right agent, you buy a property in an area that commands good rental rates from high quality tenants. If you work with the wrong agent, you can buy a property and encounter high vacancy periods, troublesome tenants and poor appreciation over time.
A property manager is the final core member of your team. Whether they are full-time, on call as needed or just a local contractor who can assist, when the inevitable issues occur with tenants or the property, having someone who can handle initial calls and be present for the necessary work to correct the issue is crucial.
The final factor is of course the property itself. It seems obvious, but when people talk about owning income properties and whether it is a good or bad thing, they have a property or type of property in mind.
If they are thinking about a run-down house in a bad area of town, with tenants on social assistance and battling drug problems, then of course the view they have on income properties is not going to be overly rosy!
Another person might be considering a charming house close to a university or college, with visiting professors staying for six month stints as they teach a course. If that is what comes to mind when you think of income properties, then it might sound pretty appealing.
Ask any investor who has owned good properties and bad properties which gave them the best experience and the answer is of course the good property. When cost, income, appreciation and tenant management is all considered in the purchase decision, you get a property that provides you with a positive experience in real estate investment.
Let’s sum up.
If you come to real estate investing with the right attitude and a willingness to view the venture as a business to be managed, you can find it a very rewarding activity. There will be the occasional disagreements but it’s a business relationship and it can always be resolved by agreeing to part ways.
By working with the right team, you get the financing you need to afford the best possible property, the Realtor who finds you that property and high quality tenants to rent it from you, and finally the property manager who oversees it so you don’t have to do it yourself.
With the right attitude and the right team, you end up with the right property. This means fewer issues moving forward, better quality tenants and higher property appreciation. Put it all together and it spells a great experience being a landlord and growing your wealth through real estate.