Investment properties are an amazing way to build wealth and invest in your future. And one of the best real estate investments to get into is a rental property. But owning a renter means that you have to actually rent it out and become a landlord. That’s a lot of responsibility since you are the one in charge of someone else’s living quarters. But are you really ready to become a landlord?
For a rental to be a good investment, the finances have to be right. Because rentals come with changeable elements (renters), being financially prepared is critical. Because your rental will be an investment, your mortgage and down payment will be different from the standard primary residence. Mortgages for investment properties usually have stricter requirements, so you’ll want to make sure you’re prepared.
You’ll also need a larger down payment—at least 20% is the standard. You’ll probably also need to do some updates to the property before you rent it out, so make sure you have funds for that as well. And keep in mind that insurance and taxes will be different for your rental since it’s an income property. Other monthly expenses can include maintenance and fixes needed to keep the rental in good shape.
When it comes down to it, you need to make sure that your rental is profitable and will more than cover its expenses.
The other part of the landlord puzzle is that of time. While a rental is an amazing way to make passive income, it does require a bit of time. And if you’re thinking of becoming a landlord, you need to make sure you can afford that time. It takes time to find good renters and keep them happy. If you want to save money, you can do it yourself.
But if you’re tight on time, you can always consider a property management company to take care of the day to day and tenants. However, property management is another expense, so you need to make sure that the rental property is a good investment.