However, before you decide to take out a mortgage to buy a property and turn into a landlord, there are few things that you should know and take into consideration.
You should have Cash, Lots of It
Banks are no longer doling out mortgage amounts freely because of the Barney Frank and Fannie Mae situation and Dodd/Frank and so on – the happy days are over with. They have tightened their lending procedures and this means it is necessary, you have the 20% down payment ready, should you want to turn into a landlord. And, if you cannot afford the minimum 20% then you are definitely not cut out to be a landlord yet.
It is not just about buying the property. You also have to have money to fix and repair the property to make it attractive for prospective tenants. So, if you want to turn into a landlord, make sure you have plenty of cash available.
It is a Risky Business Endeavor
Becoming a landlord is not just about making money from the rent. You should also have a high appetite for risk. Owning a rental property comes with its own share of risks, such as non-payment of rent, damage to the property, prolonged vacancies, tenant evictions, and lawsuits. If you have the ability to take these risks, you should do just fine. Otherwise, this is the wrong business to get into.
Your Property can get Trashed
The risk of bad things happening is omnipresent in the world of business. However, there is a reason why people who own properties don’t always turn into landlords. You may already have read about the way properties get trashed by tenants before they leave or during the tenancy.
Did you know these stories are often true? You will be surprised at the kind of damage tenants can leave behind. If this happens to you, your passive income stream will dry up until your property is fixed. Depending on the amount of damage, it could be a few weeks or months. You may even rise to new heights of frustration as well!
So before you decide to buy your property, be aware of what awaits you. Educate yourself and ensure you have the stomach for it. If you still want to turn into a landlord, go right ahead. You also can collaborate with a property management company to help you out and handle all aspects of your property. This will reduce your stress and work and allow you to focus on other business and personal endeavors that you may have.