Want To Be A Landlord. Here Are 5 Horrible Truths And Survival Tips

CONTRIBUTOR

I cover single parent, gen x and sandwich gen personal finance.

Opinions expressed by Forbes Contributors are their own.

TWEET THIS

(Photo by Justin Sullivan/Getty Images)

Regardless of real estate downturns owning property has been, and will perennially be, one of the best investments you can make. As a single parent intent on leaving my children a solid monetary legacy I have endeavored to balance my financial portfolio with income generating property. But there are pitfalls in being a landlord I learned the hard way.

So, before you dive into the world of property management consider these pitfalls.

The first and biggest truth about income property is your out of pocket expense only begins withe the down payment. As soon as escrow closes you potentially can be faced with remodeling and up to code costs. If the property is damaged or out of date you will need to make upgrades. And there is not guarantee that you will have the property rented simultaneously every single month. In other words, your healthy green nest egg could quickly become brown silty quicksand.

To be successful manage your savings for financial fluctuations. Don’t spend during the flush months in order to have ready cash for the times you will have vacancies, late rent, or major repairs. My rule of thumb is a four month cushion for all property expenses.

Being the landlord means endless repair phone calls. My tenants had issues from the moment they moved in. Their repair call requests averaged once a week for eight months. In total I spent well over $10,000 in the first two months of their occupancy repairing and/or replacing every single appliance on the property.

It is not okay to slide on any of these expenses. Landlord/tenant laws require that you make repairs quickly. If you don’t, you could be held liable for additional damages.

My suggestion; invest in a home protection plan. Had I done this from the start I could have saved thousands. You may also include in your lease agreement that tenants must alert you to any repairs three days following their move in date. After that all normal wear and tear is their responsibility.

Hopefully, you will have tenants who pay the rent on time every month. Unfortunately, this isn’t always the case. “Most of the protection a landlord has {to protect against bad tenants} are preemptive, rather than reactive,” says Nathan Miller of Rentecdirect.com. “I always recommend a landlord verify every adult occupant's criminal, eviction, and credit history prior to moving them in. Most bad tenants have been bad before and probably have red flags on these reports. It cost approximately $15 and can save thousands down the road.”