If you are thinking of starting to invest in real estate you may be weighing your options. There are several real estate investments available in the market: you can buy a commercial property and lease the space to businesses or you can buy a rental property and become a landlord.
Being a landlord looks great when you see it on popular reality TV shows such as Flip This House, but don’t be fooled, real estate investments aren’t all fun and games.
If you’re thinking of buying a property to invest in real estate here are a few things you need to know:
The mortgage is always due
Tenants normally need to pay rent on the first of the month, but the reality is that tenants can be late with the rent. Unfortunately the bank doesn’t care if your tenants pay their rent late because the mortgage is still due on the same day every month.
It’s a good idea to have at least three to six months of your mortgage payments saved up before you start thinking about renting to tenants. This way your credit score won’t get ruined if your renters are late with their monthly payments.
You’re responsible for the property upkeep
Even though your real estate investments might have other people living in them, you are still responsible for the upkeep of the property. Snow needs to be removed, grass needs to be cut, plumbing needs to be in working order and the heating system needs to be up to par. These can all be expenses that you may not be prepared for – especially if there’s an emergency such as a flood.
When considering whether to invest in real estate take the property upkeep costs into consideration on top of the mortgage, property taxes, property insurance and other fees.
Be prepared for the hidden costs
Real estate investments aren’t always easy. It’s not like you can buy the property, rent it out tomorrow and collect your checks every month. Owning a property comes with several hidden costs. Keep in mind that the property has to be maintained and kept up to code when it comes to electric and plumbing, this could require additional renovations to be done before you rent out the home.
Although tenants will most likely have their own furniture, you may want to provide basic appliances such as a fridge and stove in each living space. Those all come with a cost. If your real estate investments have multiple apartments in one building you as the landlord are responsible for keeping common areas clean and tidy, that requires ongoing cleaning costs.
You’ll always be on call…always
If a pipe bursts in the middle of the night or there is a gas leak or a fire you are responsible for getting it fixed. As we all know, life’s little curve balls can be thrown at the most inconvenient times and those times can be early morning or late into the night. Unfortunately as a landlord your phone doesn’t get to turn off on nights and weekends. When someone’s living space and well being depend on you it means you’re always on call.