The Psychology of Becoming a Landlord

I can understand the trepidation of becoming a landlord.  I bought my first investment property when I was 28 years old and I can tell you that it was a very anxious time.  Not only was i buying an investment property for the first time, it was a 12-plex, so I was jumping in with both feet.  I'm naturally a numbers guy so a couple of weeks before we closed on the property, I ran the numbers day in and day out to make sure I wasn't getting in over my head.  And of course there was the anxiety of knowing that I would be responsible for managing the day to day operations (and complaints) of my soon to be tenants.  All of the factors considered, the pluses far outweighed the minuses, so my partner and I ended up closing on the property. 

We subsequently sold the property a few years later for a very healthy profit.  If I wasn't able to overcome the anxiety that comes along with becoming a landlord, I would have missed out on an incredibe opportunity and forfeit some significant profits. 

Many have thought about buying an investment property at some point in time.  Everyone has a friend or knows someone who is invested in real estate and thinks "Hey, that would be cool, BUT ...".  When this thought hits, we can divide people into 2 groups.  Those that don't have the down payment (Sorry guys, but you need some type of funds to get into an investment  property.   Lines of credit and Joint Ventures are options but those topics are better left for another time and not for the novice investor).  The other group is comprised of those individuals who have the funds to invest but their fear of the unknown keeps them from pulling the trigger.  This article is for those individuals whose fear of the unknown has kept them from making that investment.

Investing in property is not to be taken lightly.  It is a serious committment, but at the same time, it is not rocket science.   A little bit of organization goes a long way.   The investment process starts as soon as you have made the decision to invest.   

1. Educate Yourself.  You invest in properties to earn money.  Treat it as an investment.  As such, you need to learn about cap rates, typical income, expenses, mortgage rates, rental rates, vacancy rates, and areas which are good investment bets.  You can learn about these things by getting online and doing some research, talking to real estate agents and joining real estate investing groups.

2. Find the Right Property.  Once you've armed yourself with a  good education, you need to find the right property.  A good real estate agent will help you enormously in this area.  Try to find one that specializes in investment properties and ideally owns his own investment property.  Agents can provide good leads but make sure you are also looking for the right property (Check out the "Finding Properties" section for a good head start).

3. Be Prepared to Manage.  This is the part that tends to scare people the most.  Managing the rental property.  I've heard stories of individuals who have bought investment properties only to sell them a couple years later because they are too much of a "headache".  No doubt, at times being a landlord can be trying, but those times are usually few and far between as long as you pick the right property from the outset and you are an organized individual.  The basics on a monthly basis include collecting rent (get post dated cheques from your tenants), paying the bills (utilities, mortgage, etc...), maintaining the property (eg. lawn mowing, snow removal) and in some cases dealing with the odd request from a tenant (eg. leaking tap).  As you graduate to larger properties you can hire a superintendent to take care of the day to day duties.

Although some people refer to investment properties as "passive" income, they still require your attention to ensure smooth operation.

At best this is a very cusory overview of what is required from prospective landlords, but I want to convey that the potential return outweighs overcoming your fear of investing in income properties. 

For those still not convinced that they are ready to buy a property on their own, but still want to get involved in real estate, it may be time to start looking for a Joint Venture partner that can bring their expertise to the table.

Comments

[Steve Colleen]

Most of the times, when people find it hard to get a desirable rate for their property, they prefer seeking the help of real estate agents, as they would assess the property, and set a fixed rate, with no chances of bargaining. It certainly helps the property owners to get the right value for their property.
Thanks!
Steve Colleen