So you want to be a landlord?
Are you sure?
Are you ready to chase down tenants that don't pay?
Are you ready for calls to fix toilets at 8am on a Saturday morning?
Are you ready to pay your mortgage payments even if you're not getting rent?
If I haven't scared you off from your dream of being a landlord...keep reading. If I have.... thank me now because there are alot of expensive lessons that can be learned along the way. I just did you a favor.
In this new series...I'll go through the steps of becoming a landlord. From picking a niche to analyzing the numbers to property management. In this first step...I'm going to discuss why it's important to pick a niche.
Big Fish in a Little Pond
The old saying..."I'd rather be a big fish in a little pond, rather than a little fish in a big pond" has a lot of meaning in the real estate investing world. Investors need focus. Chances are if you want to be a landlord it's because you want the long term financial independence that cash flow real estate gives you. To achieve that goal...you have to be focused...focused squarely on achieving that goal.
In order to maintain focus investors need to pick a niche. The niche can be a neighborhood to specialize in, it can be a type of property(apartments, single family, strip malls, vacation homes), it can socio-economic (low-end, student, executive)...whereever your interest lies in where you should focus.
Pick a Neighborhood
Specializing in a particular neighborhood has very distinct advantages. After buying a successfully renting several homes...you'll gain a good reputation throughout your neighborhood as a good landlord who takes care of his tenants and properties. People talk... that talk can help you keep your properties filled even when other landlords are having problems.
Another advantage of picking a neighborhood is knowing what to expect from a home before you even walk into it. One of the hardest parts of picking a potential investment is determining what repairs need to be made(we'll get into this in a later post). Once you buy several homes in a neighborhood- you'll get a "feel" for the homes and what problems they typically have...even before you step foot in the home.
Types of Property
There are as many types of potential rental property types as there are investors looking for them. Some investors only buy duplexes, some only quadraplexes, some only large apartments, some only do small commercial, some do vacation homes at the beach- others vacation homes in the mountains. Literally...there are thousands of variations. Pick what interests you. I had a client that only invested in time shares at PGA Tour stops. That was his interest...and he loved it.
Many investors only want to deal with Student housing. Student housing can be lucrative as parents typically pay the rent. However students many times are very tough on properties.
Section 8 properties can also be lucrative. The government pays the rent on the first of the month...every month. There is an initial inspection to make sure the property is safe for the tenant. Then there is a yearly inspection to verify the landlord is keeping the property in good repair. If you're a good landlord...and you keep your properties in good shape... these inspections should be no problem
Executive housing is great if you have the means to invest in upscale housing. Executive housing is typically kept in great condition by the tenant. Many times- the rent is paid by the company that employs the executive. Be prepared to furnish the home with upscale quality furnishings. Also- expect to accept short term rentals...three is six month leases is common.
The important first step in becoming a landlord...is finding ther property type that interests you. If this is going to be a part of your long term strategy... you have to enjoy what you do.
Next up... Analyzing Potential Properties...