Owning rental properties offers a great opportunity to earn a relatively passive income. However, it may not be the right venture for everyone. If you are looking to invest in your first rental property for the first time, taking these four factors into consideration can help provide some clarity to the decision.
1. Locating and Screening Prospective Tenants
Depending on the local market condition, prospective tenants may be abundant or few and far between. Think about how you are going to attract applicants and then how you will screen them to make sure they are qualified. As a minimum, most landlords will run a background check, contact references and check with a consumer reporting agency to determine creditworthiness.
2. Following Fair Housing Laws
There are some laws that all landlords should know. among them, the Fair Housing Act outlines rules about discrimination and reasons you can (and can’t) deny a rental application. Educate yourself about these rules and other good practices to follow as a landlord. It will help you stay within the scope of the law and provide fair housing to prospective renters.
3. Covering Costs When Properties Are Vacant
While collecting rent payments can add a significant amount to your monthly income, housing and utility payments still must be made even if your property is empty. Think carefully about how you will manage the added expenses of a property before you decide to invest.
4. Completely Repairs and Maintenance Tasks
Property maintenance is another cost and responsibility you will need to bear. You might decide to perform it yourself, which means you will be on call at all hours of the day and night. You can also choose to hire a manager, but that will eat into any profits from rent.
Owning a rental property can add to your income with minimal investment of your time and effort. However, not everyone will find it an enjoyable endeavor. Think carefully about how you will find tenants and the costs associated with owning an extra property before you make any decisions.