Guide to becoming a landlord

People may pursue being a landlord as a means to ensure a steady source of income. There are other benefits to owning rental properties, including potential tax deductions and long-term security.

Investing in residential rental property can be a lucrative way to increase wealth, but it is also a lot of work. It is important that prospective landlords do not overlook the risk involved in such a pursuit. As with any investment, it is best for people to do their homework and weigh all of the information before moving forward.

WHAT IS A LANDLORD?

Before becoming a landlord, it is best to get a broad picture of the role. A landlord is a private individual or company who owns a property and rents it out at a profit. It is believed the concept of “land lording” began in the early 1800s as a result of overcrowding in the United States. Landlords bought property to let out to people in need of shelter and realized they could make money by renting homes and apartments to others.

HOW MUCH DO LANDLORDS MAKE?

Unlike a full-time job with a set salary, it is not possible to nail down one figure for income on a rental because many variables go into the equation. Real estate professionals note that rental-property income varies based on the property’s location, whether the landlord lives on the property and whether a person is a full-time or part-time landlord. One thing landlords have going for them is property appreciation. According to Forbes, housing prices have increased 4.5 percent per year since 1975.

COSTS OF BEING A LANDLORD

Potential landlords should understand that buying rental property requires an initial sizable financial investment. It’s important to know some of the potential costs involved:

• Buying a property

• Landlord insurance

• Advertising the property

• Attorney fees

• Tenant backgroundcheck fees

• Maintenance and repair

• Loss of income if tenants fail to pay

• Loss of income between tenants

• Hiring a property manager

LEARN THE RENTAL LAWS

Landlords should know federal laws and local regulations that pertain to rental properties. Most laws involve making “reasonable accommodations in rules, policies and practices or services if it is necessary, should a tenant become disabled.” There are building codes specific to rentals, and a skilled real estate attorney can help landlords navigate legal issues.

KEEP ACCURATE RECORDS

Record-keeping is vital for any good landlord, and hiring a bookkeeper or accountant can be a wise investment. In addition, keep track of tenant background checks and credit checks. Receipts and records are essential.