What Do I Need to Become a Landlord?
Becoming someone’s landlord — in other words, becoming a property investor — sounds complicated. Don’t worry; it’s at least twice as difficult as it sounds.
Here’s our basic checklist of what you need to become a landlord successfully:
Obviously, you have to purchase the property you’re going to turn into an income stream, but less obviously, there is always remodeling that needs to be done as well. Even if your home is seemingly-perfect, you’re going to need to deal with things like:
- Ensuring the doors are secure (i.e. installing deadbolts, re-keying, peepholes, etc.)
- Meeting the Americans with Disabilities Act requirements for rentals (if you have any government funding whatsoever.)
- Getting the property certified as up-to-code and/or properly grandfathered as your state allows.
Once the property has started renting, you can absolutely rely on needing more money, because you can absolutely rely on the fact that something will need repairs within the first 90 days. It doesn’t matter if you purchased a literally newly-built home — we’ve seen new-built homes that needed water heaters replaced, kitchen counters refinished, roofs repaired, and windows reinstalled all within the first month after being rented, and none of it was the tenant’s fault!
That was literally more than $3,750 in repairs needed. Mercifully, that home was still warrantied by the builder, but if you’re purchasing a pre-owned home, that’s the kind of eventuality you need to be prepared for — and chances are, you won’t have a warranty to cover you.
Making Judgment Calls and Facing Conflict
When you’re a landlord, the first week of every month is a mess of people trying to get you their rent and trying to explain to you why they haven’t gotten you their rent. You’ll face tenants who start the whole process just livid beyond reason, literally screaming mad — because they haven’t paid you yet — even before you tell them that they have three days to pay or quit. If you can’t deal with unreasonable people, and you feel uncomfortable judging who deserves a break and who doesn’t, consider hiring a property manager and focus on the investment side of the process.
Evictions are pretty simple, on the surface: you file a notice at a courtroom, get a court date, show up, and the judge tells the tenant they have to get the heck out. Done deal, right? If I may quote Dracula for a moment: “BWA!ha!ha!ha!ha!haaaaaaaaaa!”
The truth is that evictions are so costly and time-consuming that just about the only thing more costly and time-consuming is ignoring a problem tenant that is destroying your property one day at a time. Even if you’re on the ball and do everything right, a successful eviction can eat through your supplies of time, money, patience, and good judgment with startling rapidity. Worse-case a court date can be a month out, the repairs may take a month and cost as much as three months’ rent, and then it takes you another month to find a new tenant — so you could be down a conservative 6 months’ worth of income even though you were a perfect landlord. This makes it imperative to have a system for evictions and follow it diligently – with FEW exceptions!
In short, being a landlord requires an immense amount of foresight, an immense amount of self-control, an immense amount of savings, and the ability to survive feast-or-famine finances. Fortunately, if you have the patience and the finances, this is one storm that can truly make it rain.