No matter where in the world you go, people will always need somewhere to live. This is why rental income and services like hotels and Airbnb are great ways to supplement your existing income. If you’ve got some money saved up and are looking to invest in ways to have your money work for you instead of just sitting in a bank somewhere, it’s worth considering buying an investment property.
You don’t need to have all the money on hand either. It’s possible to get a mortgage on a cheap property. Just fix it up so that it looks appealing to prospective tenants, and have the rent cover the mortgage payments and give you a little extra money on the side. Here are a couple things to keep in mind if you want to make some passive income by becoming a landlord.
Know Your Tenants
People usually rent places based on three key factors; how much the place costs, how it looks, and where it is. If your property is a charming little cottage overlooking a lake, then it’s going to demand a higher price as a vacation getaway than a house in the suburbs.
Likewise, if you’re advertising your property to young professionals moving to the city for work, then something like an affordable one-bedroom apartment will appeal to that demographic more than it would to more established people looking for a permanent home to start a family.
If you already have a property that you want to rent out and you know who you’ll be marketing it to, take the time to give the place as thorough of an evaluation as you can. Scrutinize every single nook and cranny. If you find anything that needs fixing or some maintenance, do it now rather than later. Once the place is in good condition, take pictures of every single thing you can.
Once you’ve got your lease agreements written it’s a good idea to have copies of these pictures attached to the documents. This way your tenant can attest that they received the property in this condition, and any damage that appears after the fact is their fault. This comes in handy in case you’re unfortunate to encounter…
Every landlord’s nightmare. Bad tenants are some of the biggest headaches you’ll ever encounter. It’s baffling how some people don’t know how to take care of property that isn’t there’s. This is the main reason why you need an iron-clad lease agreement. Make sure that it’s fair for the tenant of course, but bake in as much security for you and your property as possible.
It would be worthwhile to consult a lawyer and have them write up a lease agreement based on the relevant property laws where you live. This way you can have a ready template ready for the next tenant on your property, and you can be sure that the agreement was written by someone who knows what they’re talking about. Do not, under ANY circumstances, get lazy and just pull a template off the internet. You might regret it later.
Don’t Be a Pushover
If you’re a compassionate person, it might be easy to fall for sob stories that a non-paying tenant will feed you. While it’s okay to cut them some slack every now and again, especially when they have evidence to show that they’re telling the truth, don’t be too loose with your policies. It’s easy for cunning tenants to manufacture evidence or tell sad stories, so when you feel that you’ve helped them out enough don’t be afraid to sit down with them to enforce your contract.
They signed it, and they understood what their obligations were when they got into this agreement. Don’t sell yourself short, and always protect your property and interests first. Not to say that you shouldn’t be compassionate, but don’t let yourself fall victim to tricks like this and lose valuable income that you might need.
If you’ve got a steady stream of revenue coming in, don’t be afraid to diversify the kind of properties you own. Every kind of property has it’s ups and downs. Residential property will get you a good steady source of long-term income, short-term rentals require less intensive maintenance and are generally easy to set-up, and so on.
Finding what kind of properties you’re good at managing is important to making this a viable long term income source. Just be smart, and know what you’re getting into when you make investments, and try to pay off your debts as soon as possible. It can be easy to over-commit on an investment and find yourself wallowing in debt you can’t pay off. Take it slow, and branch out at a pace you’re comfortable with and you’ll be well on the road to an early-ish retirement!