So you want to be a Landlord . . . .

So you want to be a Landlord . . . .

Why would anyone ever want to be a Landlord?  A question I ask myself regularly but there are a LOT of POTENTIAL positives to investing in Real Estate:

  • Long Term income stream
  • Tax Advantages
  • Diversification of Investments
  • Appreciation of Asset Value

As with all investments there are also several POTENTIAL risks, or negative aspects:

  • Tenant issues
  • Maintenance Challenges
  • Time commitment involved
  • Cash Flow Risk

There are many aspects to deciding whether or not to invest in Real Estate, while the list below is certainly NOT ALL INCLUSIVE, here are 5 things to think about/familiarize yourself with:

  1.  Landlord-Tenant Law The State of Michigan has laws governing the Landlord-Tenant relationship, a great place to start researching this is  https://www.michigan.gov/ag/0,4534,7-359-82915_82919_82241_82248—,00.html    This website also includes a .pdf document titled  “Practical Guide for Tenants and Landlords” which is a great resource and includes sample leases and other documents
  2. Local Rental Restrictions Many Local jurisdictions have regulations regarding Rental Housing which may include fees for registration, licensing, inspections, etc.  A good place to start is with the local taxing authority for the property you are planning to purchase rent out.
  3. What do you take on, what do you hire out?  Many investors hire a Property Management Company to handle leasing, maintenance requests, rent collection and other items.  Of course they also charge a fee typically 8-10% of gross rent for this service. If you plan to self-manage, get your documents in order and make sure you have your maintenance company/crew lined up, at a minimum this should include HVAC, Plumbing, Electrical, Handyman, Lawn care.
  4. Keeping your Records and Finances Organized   Meet with a Lawyer and a Tax Professional early on to review your documents and record keeping systems.  Be sure to get a good understanding from your Tax Professional on what items are deductible for tax purposes and how your records need to be maintained.
  5. Finding Tenants and Screening   If you self-manage, research where to advertise for tenants, and document your tenant selection process.  Use a uniform application, ask for and review references. Credit checks are a good idea and there are services that will perform these for you.  It’s also a great idea to review EEO laws and your processes with a Lawyer.

Investing in Real Estate isn’t for everyone, but has provided solid income streams for many people. Trying to decide if its right for you? Talk to a REALTOR that is experienced in Investment Properties.

 Give me a call and let’s talk!