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5 Key Areas Of Management In Being A Landlord
Despite what gurus and experts claim, being a successful landlord is not just traveling the world like you’ve always wanted and seeing the monthly rentals automatically depositing into your bank account.
It’s much more than that. So much that it can reel excited new real estate investors into submission.
It is maybe because of this that property seminars and public talks often leave out the specifics of rental property investing… because these information would more than likely drive people away altogether.
Yet the comparably low number of landlords to homeowners can also be attributed to how difficult it really is in this business.
This leaves the door wide open for the average individual who is able to absorb real estate knowledge and champion hard work to succeed.
Here are the 5 toughest parts of being a landlord.
While landlording don’t require your full time commitment especially when you are just starting out, it’s also not something that require only an hour or 2 of your attention each month.
You need to at least make yourself available and reachable at all times.
There will always be ad-hoc issues that can arise with tenants. And once in a while, you will need to spend more time than you were initially willing to to attend to bigger issues.
If you are the type of person who likes being busy all the time, converging landlording activities with your regular daily activities should of little problem. But the people around you should be ready to be neglected by you.
And if you love to laze around, which was probably a big reason why you want to get into rental real estate in the first place, you might find time management a big inconvenience to get around.
The most stressful part of being a landlord is not contemplating where to park your rental money in the bulging bank account. That would be a great problem to have 😀
The biggest problems are usually not problems that can be solved by contractors and vendors you hire for repairs and maintenance.
It is the mixture of feeling responsible for the well-being of your tenants, yet getting frustrated at unreasonable demands from them. And that’s without mentioning the potential clash of personalities between you.
Then there are the tenants who make it their life purpose to make your life hell.
While the majority of tenants are decent people. When you are in the business long enough, you will eventually run into a few who would make you regret the day you ever presented them with the lease agreement.
You might think that a lease that stipulates terms in black and white will protect you.
But remember that you are dealing with people here. And people have the ability to decide and make choices. They could very well choose not to abide the agreed terms of the tenancy.
Eviction is not as easy as most people think.
You’d be a lucky landlord if you have to face the prospect of vacancies.
Big picture stuff like a weak economy can give you sleepless nights.
This is part and parcel of real estate investing. And you should factor these undesirable events into your forecast especially for the long term.
This would help you prepare for hard times should they really hit you directly. This is why experienced landlords usually keep a cash buffer of at least 6 months of operating costs for just-in-case moments.
4) Legal risks
New landlords often don’t realize what a mountain of a legal risk landlording really is.
Legal problems don’t often arise. But when they do, they can be HUGE. So huge that a single case against you can bring your whole property empire down to it’s knees.
Although there are many types of real estate insurance that can help alleviate your risks, prevention is always better than cure.
- third party contracts
You name it.
Almost everything, and anything, that happens on your property can be linked to your good or bad management. This ultimately means that the responsibility is yours.
You’d probably be right to think that the mortgage is the biggest expense associated with owning a house. But you’d be wrong to think that every other expense is so small compared to the mortgage that they are negligible.
The first glimpse of what you are getting into will reveal itself on closing.
The rest will slowly pop up in your mailbox in time to come.
- property tax
- furniture installments
- maintenance fees
- housekeeping charges
- management fees
If you have the foresight to add these up before you get into real estating, you might leave this industry altogether!
There is really only 2 ways to profit from any business.
- increase revenue; or
- reduce costs
Taking into account that raising rental can be suicidal in a competitive market, reducing your expenses is your best chance of squeezing every penny out of your cash flow. And if you don’t keep track of these things with a meticulous eye for detail, you could become a desperate landlord much sooner than you wish.