There’s something slightly grand and sinister about the word “landlord,” harking back to medieval days of feudal serfdom when the lord lived off the fat of the land and the toil of the peasants.
These days, though, landlords are half of a mutually beneficial relationship that can earn them a nice income.
But how do you become a landlord, and what are the most efficient ways of earning money through rental properties?
Know the lay of the land
The first step in becoming a successful landlord is knowing the area where you want to invest. How much rent do different types of property bring in? What is their market value? What kind of people rent them?
Use sites such as Zillow to research rental prices, and see if there is a local homeowner’s association you can consult.
One of the most informative things you can do before buying a property you intend to rent is to talk to those who have been there and done it before.
Other things to consider include location, the type of property, and whether the rental is long-term (such as a family home) or short-term (like an Airbnb).
In property rental, like most investment endeavors, know what you’re getting into.
Do the math
For each property you consider, evaluate the cash flow — that is, how much income it can produce per month after you’ve calculated all the expenses.
For a mortgaged property, the could include a down payment on the mortgage, taxes, insurance, advertising costs, utilities or services that you provide for the tenant, vacancy time in between tenants, and maintenance.
Use a rental property calculator to help you. Because such costs vary, you might have to keep looking for a property that hits that sweet spot in terms of profit.
Be a Doer-Upper
Becoming a landlord requires maintenance, which you can do yourself or pay others to do it.
You’ll have to invest time and money to make a property rentable and deal with any unexpected repairs that arise during a tenancy.
One of the best ways to make money in the rental market is to invest in a fixer-upper — a house in need of quite a bit of work but that you can buy at a knockdown price.
Of course, it helps if you’re handy and have connections in the trade or family and friends who can pitch in.
A completely refurbished house with all new fittings is attractive to many tenants and might net you a premium rate.
While many make extra income from short-term rentals, a better way to carve out a career as a property landlord is to secure steady and reliable tenants.
That reduces time when your property is between tenants. During those weeks and months, you’ll need to cover all your expenses (mortgage, utilities, and so on, which can really eat into your profit margin.
The last thing you want is a delinquent tenant who fails to pay the rent or damages your fixtures and fittings (or both).
You’ll want to screen your tenants by looking at things like employment history, credit scores and criminal records.
If you do find a tenant who’s in it for the long haul — for example, they want to bring their kids up in this area and like the look of the schools — consider lowering their rent slightly as an inducement.
Ideally, the landlord-tenant relationship is mutually beneficial.
The bottom line
All in all, property rental can be financially rewarding if you research where to invest and line up excellent tenants.