As a property investor looking for a steady source of income, you have the option to lease or to flip properties. While both can potentially turn in significant amount of financial profits, leasing a property is hinged on long-term goals. And while leasing a property requires commitment to time, it can be a really profitable experience. What do you need to know?
CAN YOU BE A LANDLORD?
When you’re a property investor, you’re used to crunching numbers as you buy and sell property. But if you intend to become a landlord, you need to add one skill to your repertoire: people skills.
Being a landlord requires that you deal with different types of people. You have to be personable because what you want in the end is to keep long-term tenants. If you maintain positive relations with your tenants, problems will be minimised.
ARE YOU PRONE TO LANDLORD BURNOUT?
Just like any other investment ventures, your life shouldn’t revolve around your property investment. You also have to make sure that while you’re landlording, you also have time to pursue your personal. One crucial mistake that landlords make is that they let their investment properties manage them instead of the other way around.
So focus on generating profit from your property investment, but don’t lose sight of the things that can help you sustain your drive to achieve your goals.
CAN YOU HANDLE TENANT SELECTION?
Depending on how you see it, tenant selection can be a tedious or a pleasant experience. It all boils down to you being well-prepared.
In Australia, processes are in place for tenant screening and selection. And while you don’t have to be involved with this process at all, it pays to know how it works and how conforming to the rules can save you time, energy, and most of all, money.
There’s an option for you to hire a property management agency to get this done but if you’re the hands-on type of landlord, then you don’t want to cut the process short and end up spending way more money in the end.
HOW MUCH RENT SHOULD YOU CHARGE?
It’s simple: set the rent depending on the prevailing market rate, right? Wrong. Rent prices are influenced by many factors, and market rates is only one of them. If you’re setting the rent, consider factors like long-term tenancy and tenant property selection. Tenants have the power to choose the property they want to lease. In the same way, they also have the power to not renew their lease agreements. So manipulate your rent price based on your goals as an investor, based on the market conditions, and based on tenant behaviour.
That’s just one part of the process though. As a landlord, you also have to be informed about the trends in the rental market as you do rent analysis. Rent analysis is commonly done prior to lease agreement expirations to see if its reasonable to introduce an increase, how to do it, when to do it, and why you should do it.
In Australia, there are policies involving rent price increases. Educate yourself about these policies before making a decision.
DO YOU HAVE A CONTINGENCY FUND?
Every property is prone to wear and tear. As people move in and around it on a regular basis, things can happen that require your attention. Things like damaged window sills, clogged sink, cracked tiles, or damaged floors. Unless found to be your tenant’s fault, you need to have cash reserves solely allotted for use in situations like this.
The need for repairs may happen at a time when the place is tenanted, after a tenant leaves, or before a tenant moves in. For the latter two, you need to conduct proper inspection so you can implement repairs and have the property in crisp condition before being opened for prospective tenants.
As you can see, there are a lot of things you need to be prepared for before you ‘officially’ become a landlord. Then again, this blog promotes education in investment, so the best thing you can do is to learn everything you can about being a landlord. It’s your best option.