Been thinking about purchasing a rental property and adding to your monthly income by taking on tenants? Think about what you can do with all that extra income!

But wait! Not so fast. There are many issues to consider before becoming a landlord. While there are many upsides to the move, there are also many pitfalls. It’s important not to allow yourself to get blinded by all the possibilities that rental windfall may mean for your future. Instead, focus on the realities of what it takes to buy rental property, manage the property and deal with tenants.

1. Three things: money, money, money: Do you have enough money to not only purchase the property, but make the necessary improvements so make it habitable? If you are looking to get a great deal on a place, you may choose a fixer-upper. The potential problems are unknown. Even with a great home inspection, costly problems can arise as you do renovations and repairs. Also, even if the property you purchase is move-in ready, rest assured you will need money for upkeep. Many costly items on a home wear out — the hot water heater, the AC, the roof — ka-ching!
2. If you are going to have tenants, you have to be….well…a landlord. Sounds obvious but you need to really think about whether you are ready to deal with a bunch of strangers. Trust me — they will call at all hours of the day and night when there are problems in the house. Also, you may have a lease that requires them to pay the rent in a timely manner. If you are going to be living month to month relying on the rent to cover your investment costs, read No. 3.
3. Is it really a good decision financially? Don’t forget that you’ll have to foot the bill for homeowner’s insurance and the property taxes, as well as the mortgage. If your rental income doesn’t exceed the bill, you won’t be enjoying that windfall any time soon.

In the end, buying rental property may be an excellent choice for you. Just know upfront that you are going to have to deal with bumps in the road. Make sure you have the capital necessary to cover all your bases — including bad tenants — and be prepared for whatever may come. Because, if there is one thing you can be certain of in the landlord business, anything may come.

Need assistance with buying or selling rental property? Contact Joel R. Spivack Esq. today for assistance with your real estate legal needs. You can also rely on Mr. Spivack to draft lease documents to make sure you are well-protected as you embark on property management.