Being a Landlord
Is being a landlord right for you? For some people, the idea of owning multiple properties, each with tenants sending them a check every month sounds like a dream! It even has a sense of “free money” to it. For others, however, the idea is almost poisonous, with visions of leaky faucets, delinquent tenants and calls in the middle of the night about who knows what. So if the idea of investing in real estate seems attractive (and it should), how do you know if becoming a landlord is the right path for you?
The first thing is to understand what’s involved, all the pros and cons of being a landlord or “cash flow” investor. First, know that not all landlords get “passive income”. The word “passive” insinuates doing nothing (or little) while the rents come in month after month. However, unless you hire a property manager, accept the fact that you might be doing a lot more than you think! Here’s a short list of tasks you can expect to take on to get those rents:
- Market for tenants (advertising online, signs, newspaper, etc.)
- Interview tenants and do background / credit checks
- Collect rent every month
- Make sure utilities and maintenance fees, if any, are paid on time
- Maintain the property (lawn care) and repair as needed (tenant breaks window or garbage disposal)
- Evict tenants, if necessary (avoid at all cost)
- Keep up with market activity to keep rent competitive
Does that look passive to you? Anyone who rents out properties in Hawaii will certainly tell you this is not a complete list! However, it should give you an idea of what’s involved. Of course, you can always hire a property manager to handle a lot of this for you. Most will charge you around 10% of the monthly rent and if you place a value on your time (I sure do), then you should seriously ask around for referrals of good managers. Otherwise, keep that wrench ready for the next 2:00am wake-up call.
Of course, this assumes you’ve already bought a quality rental property to begin with. Not every property is equally suitable as a cash flow purchase. Some are easier to rent out than others because of location, proximity to public transport, floor layout, amenities and affordability. Do your homework first. Don’t jump the gun on buying a house to rent out if there are no other rentals in the neighborhood.
And make sure you plan out ahead all your monthly expenses to make sure you’re getting enough back in rent to make a profit. If you don’t account for incidentals, you’re shooting yourself in the foot. Also, with the amount of distressed properties out there in the forms of REOs and short sales, you should be able to acquire some instant equity as well as cash flow. Don’t be a speculator if you don’t have to — protect your investment against future market dips by buying at discount. While you’re ideally considering this type of property because of its long-term wealth potential, don’t discount the value of upfront equity. You may not require as much as a rehabber or house flipper, but that doesn’t mean you need to buy at retail, either.
Landlord Tenant Laws
I can’t stress this enough. No matter where you are, there are strict landlord tenant laws in effect that govern what you can and cannot do. Read up on these before you decide to become a landlord — before you rent out your first property. Your local consumer protection division should be able to point you in the right direction. Here in Hawaii, we have a downloadable PDF Landlord Tenant Handbook that answers about every question you’d ask — no matter what side you’re on.
There are many ways to be a Hawaii real estate investor. Investing for cash flow as a landlord is a fantastic way, but it’s not for everyone. Make sure you come to terms with what you’re capable of and the responsibilities required before proceeding. If you do decide that you’re ready to invest — and now’s a GREAT time with the low prices out there — then be sure to join my FAST BUYERS LIST for instant notification of quality rental properties that I acquire right here in Hawaii.