So, you’re living the American Dream. You’ve got a great job, a wonderful family, and a beautiful home. All the puzzle pieces of your life seem to be falling perfectly into place.
And now, you’re looking to broaden your horizons a bit. You want to expand your investment portfolio by purchasing a rental property. After doing your due diligence, you’ve determined that now is the perfect time to put this prudent plan into action. You figure that the positive monthly cash flow you’ll be able to generate, combined with the property’s inevitable increase in value, will help shave a good 10 years off the target date of your eventual retirement.
Purchasing and owning rental properties can be a very worthwhile and rewarding experience. The potential benefits are undeniable:
- Monthly Cash Flow / Addition Stream of Revenue
- Long-Term Appreciation
- Tax Deductions
But imagine this scenario, if you will:
It’s 2am on an artic evening in January. The winter winds are whipping around outside, while you’re nestled all nicely inside the toasty-warmth of your bed. All of a sudden, you’re jolted from your restful slumber by the sound of your cell phone ringing. You answer it to find a frantic tenant on the other end. After a long weekend away, they’ve just returned home to find their furnace on the fritz and a massive water leak in the basement. And if you don’t get over there to fix the problem fast, the entire lower level will soon be sitting under six inches of ice-cold H2O.
Too many somber scenarios like this one can transform your American Dream into a nightmare in the blink of an eye. And unfortunately, that’s just the tip of the iceberg when it comes to the potential pitfalls of being a landlord.
Here are a few more examples of things people tend to overlook when considering the purchase of a rental property:
Finding Quality Tenants
Every intelligent owner out there strives to keep their vacancies to an absolute minimum. A vacant rental property can really take its toll on your finances fast. However, not waiting for the right tenant can end up being even more costly. Whether a renter routinely stiffs you on rent – or they happen to have a penchant for destroying things – a bad tenant can turn your picture-perfect life into a horror movie marathon.
And if that ‘perfect tenant’ of yours turns out to be anything but, you will likely have to allocate a lot of time – and money – to remedy the situation. The eviction process is usually an ugly and agonizing experience. It can also be a very costly one, as well. Plus – even if the court rules in your favor – there’s no guarantee that you’ll ever see a dime in return for your troubles.
Knowing the Rules
The rules and regulations regarding real estate are ever changing. So, it’s of vital importance that you stay abreast of the latest laws and legislation affecting landlords. Otherwise, you might find yourself in a whole heap of trouble. An accidental act of discrimination toward a tenant, or a failure to follow the Fair Housing Act, could land you on the wrong side of a not-so-civil court case. And if you’re not using an air-tight rental agreement, a judge may deem your document as worthless as the paper it’s printed on.
Maintenance and Repairs
It’s inevitable. Structures deteriorate. Appliances and mechanicals break down. It’s not a matter of if, but when. And if you’re not prepared to deal with such situations, the landlord lifestyle may prove to be a painful one for you.
Now, not every issue that arises will be a catastrophe. You will likely field a few phone calls for much lesser concerns. Certain tenants may even feel the need to call you for every microscopic imperfection they can find. And while some of these issues will warrant a phone call, others might seem a bit trivial. However, you must also consider the consequences of dismissing the request. Too many of these unresolved issues might leave you with a disgruntled tenant on your hands.
There is, however, a surefire way to deal with each of these dilemmas in an effective and efficient manner. And that is to hire a property management company to manage your property for you. It’s their job to handle your headaches and to do the ‘dirty work’ necessary to ensure that your investment keeps working for you for years to come.
Now, while there is a cost involved in utilizing such a service, it is usually quite reasonable and can provide you with the peace of mind in knowing that your property is in good hands. If you would like to find out more about how a home rental service could benefit you, please contact Tradewind Properties today for a FREE consultation and home rental analysis.
Are You Ready to be a Landlord for a Minnesota Rental?
If you have a home in Minnesota and have recently moved, gotten married, or inherited another property, you have two options. You could either sell the property, though that can be difficult depending on the market, or you can rent out the property to tenants and become a landlord.
There are some questions you should ask yourself before you put out an ad for your home rental, however. Are you really ready to become a landlord?