It seems that landlording is getting a bad rap these days in some real estate investment circles. True, if done inefficiently, being a landlord can become an old-fashioned drag. If you have the smarts and energy to do it right though, it can pave the way to a great revenue stream. Here some keys to success if you are looking into investing in rental real estate.
Buy Low Sell High
The first key to making owning rental investment properties work is to think of yourself as the manager of a cash-flow stream rather than a mere landlord. Start by making sure you buy your property well below fair market value. This is an absolute must; it will set you back years if you get anxious and overpay. If you can get a truly amazing deal on a rental property, your cash flow can actually begin almost immediately, with a full payoff in five to ten years on a mortgage.
Learn How to Do Repairs Around the House
The second thing that is of the utmost importance is to understand basic home repair techniques. If you learn how to do a majority of the maintenance and light repairs on your property you will save a bundle of cash and frustration by not having to call a handyman every time you need a window replaced or a switch plate installed. Think about how much money it costs just to get a plumber out to examine a problem. If you can take care of half the problems yourself, you’re in great shape.
Learn How to Manage Cash Flow and Tenants
Next, it’s imperative that you can manage the revenue you will have coming in -- which is essentially a two-part ordeal: You have to choose the right tenant profile, and you have to handle your cash flow properly. The right tenant for your rental property will eliminate the vast majority of your financial heartache (on-time rent payments will make your life 100% easier), while being able to pay the mortgage strategically will help to get the property free and clear as soon as economically feasible. If you can handle the paperwork flow that accompanies real estate ownership, you’ll find this gets you to the break-even point faster.
Respect the Landlord in You
Again though, your first job is to overhaul your mentality about the concept of landlording. Once you start to respect yourself in this way and make better decisions, it’s easy to see how it can lead to legitimate wealth. The handyman work can be seen as something of a hobby, but your main job with this property is to manage cash flow -- much like a banker.
Banks make their profit by essentially controlling capital and then loaning it out. Your job is not that much different, though you are re-lending capital in the form of shelter. Many major companies these days follow the very same model; if a telecom giant buys out a cable company, it probably is not so much that they are interested in the entertainment industry. They are purchasing a new, salable and measurable income stream. Rental income from houses, mobile home lots, apartments, or other buildings is all measurable income streams.
There are zillions of real estate investors out there, but some of the most prosperous are landlords and real estate owners. Why is that? Buying and selling are not without value, but developing a steady, reliable income via assets is, quite simply, the way to guaranteed long-term income.
Josh Michaels is a freelance writer who survives on very little income and carefully considered financial decisions. This combination has allowed him to have fun, travel the world, and start a retirement account – all without the pleasure of holding a full-time job. He can be reached at: joshmichaelsmoney@hotmail.com
This Article is designed to be of general interest and should not be considered legal advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.
