There are some career titles that just have that certain ring about them. CEO, VP, President. All of these titles command a certain bit of respect and mean that you are in charge. You own something. You tell people what they should be doing and how they should be doing it.
Take the name of “landlord”. When people think of the title, they often think of someone hounding others about their rent being late. Crotchety individuals who follow the rest of the hard-working world around, badgering them about their noise levels. Having a landlord show up on your front doorstep is rarely something to be gleeful about.
That’s why the title “property owner” simply sounds better.
Property owner means that you are king of an empire, a real estate mogul whose wealth is immeasurable. While that can certainly be the goal, it’s going to take a while before you reach that point.
If you’re looking into property ownership, there are plenty of things to consider before you jump into that new venture.
Read this list to see if you’re ready and catch some tips along the way.
Be Confident in the Decision
Becoming a property owner is not exactly a career that you just stumble into. It takes a lot of preparation, determination, and research.
So before you decide that becoming a property owner is for you, think about why you want to do it. Owning property is just like any other business: it’s going to take a while to turn a profit. Even though you may be encouraged by the relatively high salaries, getting to that point takes time.
Let’s say you’ve purchased a property for $500,000 (what a nice perfect number, but math is easier that way).
You put down 20%, $100,000 and have roughly $400,000 to pay off.
Over a 30-year mortgage, that’s about $1,100 per month. Add on interest, property taxes, repairs, renovations and time spent trying to find a tenant and you could be looking at coughing up roughly $1,500 per month. If you charge $3,000 for rent, you could maybe pay off that house in half the time. How in the world are you going to live off of $1,500 a month?
Passive to Active Income
Many people are property owners but don’t have their sights set on becoming a mogul. Their second property is all about gaining passive income.
There are plenty of people who use that rent check and put it right into their retirement. It’s not money they’re going to be seeing any time soon.
That means during the first few years, you might be having to pull double duty as you build up more equity to eventually put down payment on an apartment complex or more houses. Even if you might be used of pulling double duty, it’s not a feat that’s easy to pull off.
Finding the Property
Now that you’ve decided that this is something you want to do and you’re ready to take the next steps, how are you going to go about finding the property?
Just like homes in residential areas, there are real estate agents who will help you find property for rent. You’ll want to look for an agent who has dealt with the rental property before. There are different regulations, different types of loans and different steps you’ll need to take before signing that dotted line.
When it comes to finding a rental property loan, reach out to Visio Lending, of the leaders in rental loans. They’re fast, easy and great to work with.
Once you’ve found the ideal property, you need to refer back to real estate’s most important rule: location, location, location.
You could have found the perfect property, but what makes this an attractive place for tenants? If the property was vacant, why do you believe that was? What can be done in order to make it a livable space once again?
Where do you go to find tenants? An ad in the paper? Craigslist? Facebook? Connections through friends and family?
What about all of the above?
Sometimes finding tenants can be just as difficult as finding the property. If you live in a hot rental market, then all it may take is whispering the words “room for rent” to have all sorts of applications coming in.
Once you decide on how you’re going to go about finding them, are you going to run background checks? How will you set rental times? These are all questions you’ll want to think of before you go about meeting potential tenants.
Getting Your Hands Dirty
As a property owner, you’re going to be wearing many hats. By law, you’ll be a property owner. You could also end up being a property manager or handyman.
If you’re buying your first few properties, you might not have the cash flow to pay a contractor to fix that bathroom wall or replace the windows. You might not consider yourself the biggest handyman in the world, but now is the time to learn.
Doing it yourself is going to save you plenty of upfront costs, meaning you’re more likely to see a profit off of your place sooner rather than later.
Take some classes at the local home improvement store or see if you can tag along with someone who has been in the business for a while. Remember, if some job seems to big for you that’s because it probably is. If it calls for it, do the right thing and call in a professional.
A People Person
Even though you might be the boss of the whole organization, that means you’ll be the front face interacting with contractors, real estate agents, tenants, and property managers.
Hiring a property manager, especially if the number of properties you own starts to grow, is key and a worthy expense. You’ll need to start developing relationships with people who you can rely on. In this business, the phrase “it’s not what you know, but who you know” that rings even more true. Having the right connections means having a job finished quickly or having your calls returned in a timely manner.