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When I quit my corporate job of 20 years awhile back, I thought I wanted to be a real estate guy. I wanted to start buying houses to rent and become crazy wealthy. Well, after buying my first property, it did not take long to realize I did not like being a landlord. I have yet to purchase my second. I am still planning on buying another one as the market settles, but, I will take my time and make sure it is a fit for me. Here are some quick bullet points on what I learned from my experience.
- Make your first purchase close to where you live. Even if it cost you more upfront to buy in that area, you will be learning a lot about the business and you don't want to be driving an hour to your rental each time you need to, or think you need to, to check on something.
- If you are buying with a mortgage, don't plan on making money in the first 3 to 5 years. Maybe you get lucky with a great situation with great tenants, but, more than likely you will find out just how much it cost to keep a property running. Depending on many factors, you may not have someone moved in for a few months, but, you will be paying a mortgage from the start. One major issue could wipe out your profits for a year.
- I know what you are thinking after that last point, "I have lived in a house for years, I know what it costs to keep it up." Well, not always true. If you are a good landlord you fix things, things that you might not fix in your own house, or put off for extended periods of time.
- Don't be afraid to fix problems yourself. Youtube can basically teach you anything. The worst that can happen is you call in a professional if you can't figure it out.
- Wait for the right tenant. Run a credit check and make them prove a work history. You are better to let the house sit for a month than put the wrong person in there.
- Make your rental agreement is long and inclusive, you may not need it, but make sure everything that could happen is spelled out and who pays for it. It is so much less stressful if you can just tell the tenant to "Per your rental agreement..." when they have questions.
- Find an easy house to maintain to keep your costs down. One story. Brick. No carpet. No HOA. Basic landscaping.
- If you have solid tenants that want to extend their lease, do not jack the rent up on them. It is a gamble that they will just pay up since it is easier than moving. It Is much cheaper and less stressful to keep someone who is making it easy on you, than to find someone new. Cleaning costs, repairs, marketing, updates, sitting empty, can all be avoided by extended the current lease.
- Be polite but firm when dealing with tenants. If your personality does not like confrontation or avoids tough conversations, this may not be for you.
