Perhaps you are undecided. Perhaps you think that, in 2020, buying for the rental market is a risky prospect.
Whilst there will always be an element of risk associated with being a landlord, there are still many advantages of the buy-to-let market.
Top of the reasons to become a landlord is obviously money. If you are looking for a stable second income, then this is it. If you have a number of properties for rent, you may even be able to quit the day job and make a good income as a landlord.
Perhaps you won’t get rich quick, but there is a good potential income stream in being a landlord.
Hopefully, your rental property is going to appreciate over time. Although it pays to be aware of the fact sometimes a property price can go down over time it is more than likely it will go up.
And depending on the type of property, its condition and, more importantly, the location, it could increase in price very quick.
A lot will also depend on the rental charged and the costs of the mortgage and upkeep of the property. However, your mortgage balance will decrease with every rental check you receive and eventually you can put the money towards building the equity in the property.
Without wishing to alarm anyone, becoming a landlord is a risky business.
When you rent a home out to a tenant, you are making yourself liable for many scenarios. These include litigation (i.e. being sued) and sudden loss of income (rent arrears).
Sadly, dealing with evictions is part of the job. If you are even thinking of buying-to-let, then this is something you should be prepared for.
The chances are you will encounter a tenant who gets into arrears. Sometimes this means pursuing them through the legal system, but sometimes you will be forced to write the debt off.
Before becoming a landlord, you should acquaint yourself with the eviction procedures in your area.
There are many reasons why you might find yourself with a gap in your rental income. It may be that your tenants move out sooner than expected, or break their lease agreement. They might withhold rent.
In the worst-case scenario, they might also trash the property and cause you a lot of expense.
It is essential you know about your local state regulations, as well as the federal laws on rental properties. Of course, you should have the best landlord insurance you can afford for these scenarios.
Having insurance can mitigate some of the worst aspects of when things go wrong, but you need to be prepared for the fact sometimes you will be out of pocket.
There are a lot of things you could end up paying for and it pays to research each scenario fully before making the decision to go ahead.
Unless you are prepared to work at it, buying-to-let in the rental market may not be for you.
Of course, there are many property management companies happy to take on the day to day running for you. However, in order to make some real money, you might consider doing the job yourself.
If you do, you should set aside time to advertise and stage the property, vet your tenants, deal with tenants’ queries, arrange deposits, and any necessary maintenance that needs to be done.
This is in addition to ensuring all the paperwork is correct and rent is regularly paid etc.
In addition to the wildcard expenses of outrageous fortune, there is also the more mundane everyday expenditure which can really tally up for the rookie buy-to-let investor.
These include everyday wear and tear, refurbishments after tenants vacate, renewals and repairs, garden maintenance and major disasters such as boiler breakages and leaks.
Is it for me?
In short, being a landlord isn’t for everyone. It is time consuming, risky, and hard work. However, the rewards can be very lucrative and well worth the investment.