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Renters are bracing themselves for tough times. According to a Harvard study, they’re going to be struggling for at least the next decade. There’s a housing shortage in many markets, rents are soaring, and homeownership is at an all-time low: It’s only gonna get worse for the non-homeowner.
Which might make you think this is the prime time to become a landlord: Lots of great rental candidates and sky-high rents to charge. If it were only so simple.
Forbes compiled a cautionary checklist for would-be landlords. Landlord, know thyself. The list of questions to consider when looking at acquiring a rental property includes:
- Why is this property for sale (think of it as asking why that one appealing bachelor is still unmarried)?
- How stable have the tenants been, and has the rent gone up over the years?
- How much money do you have to put in, and how much does that mean you have to up the rent?
- For how long can you handle it remaining vacant without hemorrhaging cash?
- Who’ll manage the property, and how much will those services cost?
Buying a rental property, Forbes wrote, “isn’t a no-lose proposition.” Managing a rental property is a job, and the cost and the calculation aren’t as simple as rent – mortgage costs = profit. Are you ready for these other considerations: “Destruction of property, late payments, loss of tenants and vacant apartments that now need to be cleaned and repaired to be ready for the next potential renter.” (By the way, there’s almost always a loss of income when renters change over.) Also: “credit checks, maintenance, utilities, exterminators, insurance, legal advice, advertising and other costs that you might not have considered.”
We’re not saying don’t do it, we’re just saying make sure you think through this type of residential real estate investment. And add this to your calculations: the value of not being woken up in the middle of the night to fix a radiator? Priceless.
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