3 Lessons You Need To Learn About Rental Properties As A First-Time Landlord
Learning how to rent and sell property takes time and any budding landlord needs to know that there are pitfalls involved.
What you need to know about buying, managing and selling rental property
I have been a landlord for quite a while now. The things is, I enjoy being a landlord. It is one of the best ways to achieve financial independence at a young age…if you’ve been wise in the way you manage your property and screen your tenants.
However, there are things that you can only learn from experience. Things such as:
- Which rental properties to buy
- How to draft a binding lease agreement
- How to screen tenants
- How to deal with all those property taxes and so on
What I know now that I wish I knew then
As a landlord, I have come to learn a few bitter lessons. Some of which have cost me both time and money. Hopefully you don’t have to go through my trials and tribulations because I am here to guide you.
Lesson 1: Your property taxes may and will explode at some point
Every now and again, local government officials deem it fit to increase property taxes. If you are lucky, you will have foreseen this increase and adjusted your rent accordingly. If not, then you might have to go a full year making almost no money from your rental property because the taxes have gone up by like 300%.
Lesson 2: Tenants can be difficult
As much as you may have an iron-clad lease agreement that may not be so advantageous should you land a horrible tenant. There are some people who simply will not respect the property. Not only will the paint job go to the dogs, but they will also pester and bother the neighbours so much that no one will want to live on your property. The problem with iron-clad leases is that sometimes they tie your hands behind you and as much as you may want, you cannot summarily kick out such a tenant. There is an entire process that takes time and causes nightmares.
Lesson 3: Just because you are a landlord now doesn’t mean that you will always make money
That ‘TO LET’ sign could quite possibly remain hanging there for much longer than you anticipate. It is not uncommon for landlords to go for months without any tenants. Just because you bought the house and renovated it does not mean that it will automatically get tenants. There is a lot of managing and advertising to be done to ensure that the houses are always occupied.
Adapting to the situation
Being a landlord means learning how to buy property, how to sell property, how to rent, how to buy at an auction and how to manage all your properties so they make you money. Unfortunately, there is no exact science to do all these. The market can change suddenly, and what used to work before may not work today. In order to remain profitable, you need to learn how to adapt.
For instance, if you are having a hard time finding a tenant for one of your properties, perhaps, it’s best to sell it and move on to another property where attracting tenants are easier. So naturally, the goal is to be able to sell quickly, and raise capital for a different investment property.
I found myself in that predicament not to long ago. In my desperation to sell quickly, I tried looking into lease options that have been practiced by investors like David Lee, Simon Zutshi and Rick Otton. It was a new process I felt I had to learn out of necessity, and I’m glad I did. If I tried sticking to what I only know, I would have still had that tenantless property sucking money out of my pocket year after year (thanks to maintenance costs, taxes etc.).
So again, in order to be successful, you have to be willing to try new things and adapt to changes quickly.