Businesses need a plan to survive and being a landlord entails being a business owner. They do not just decide to open shop, sell widgets and then make money. Before starting out as a landlord, make a written plan as to what your objectives are and how you hope to achieve them and then talk to other landlords and business owners to ensure it is viable.
Property requires more than just mortgage payments. You have to factor in taxes, adequate insurance, vacancy reserves, maintenance and repair reserves and any other miscellaneous costs that can appear. Make sure your business plan considers this so you have an appreciation of costs before they show up so you can determine if the rental market in the area you are looking at is feasible.
For landlords (and any entrepeneur) this can also include understanding current and future economic potential for the area. While prices may be incredibly cheap to purchase in some areas, they do not make good investment properties as tenants and future buyers are leaving some areas in droves and this may have an impact for many years. If your business plan doesn’t cover how to make payments when vacancy rates and unemployment rates are extremely high, you need to rethink your plan, or find a better area to purchase.
If you missed Tip #1, it is available here, Landlord Tips #1, Don’t buy where you live, buy where tenants live
If you missed Tip #2, it is available here, Landlord Tips #2, Spend Extra Time Screening Tenants, So You Don’t Spend Time Evicting Them Later
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