On the surface, renting out investment property can seem like a dream: instead of toiling away all day in an office, you can kick back, contract out all the tough stuff, and rake in your rent dollars at the start of each month. We sincerely wish it were that simple! Unfortunately, the reality of property investing is that it’s as challenging as anything else. And, like anything else, your success depends on a number of factors, both within and outside your control.
The short answer? Yes, you can make money on rental property. As long as…
What qualities make a good rental property? Well, we’ve dedicated a whole blog to answering that question; but to make a long matter short, it’s all about location. A great investment property should be within driving distance of schools, shopping centers, grocery stores, hospitals and other amenities. It should also be in good repair; have reasonable property taxes; and have a low crime rate. The property you choose will be half the battle when it comes to making a profit, so be sure to work closely with a property management company or realtor with substantial industry experience. Timing matters, too: if you buy near the bottom of the housing market, your properties will likely increase tremendously in value.
Furnaces; air conditioning units; roofing; sump pumps; pool repair. That’s just a very small list of things that you may have to fix at one point, which individual tenants aren’t responsible for (and which therefore can’t be paid for with security deposits). Now, in an ideal world, if you are charging high enough rents and spending as little as you can, you should have enough left over from your profits to cover big repairs. But since we’re not living in an ideal world, it’s likely that the repair money will have to come from your own pockets. That means that you’ll need to have an emergency fund already set up by the time you purchase your first property—and you’ll need to be the type who is budget-savvy and budget-loyal. If you currently love shopping and spending, that will have to change if you want to be a profitable landlord.
Not only will you have to be firm with yourself, you’ll have to be able to be firm with your tenants—no matter how nice or forgiving you want to be. Unfortunately, some people will take advantage of temporary kindness for weeks, months, or even years until you work up the courage to put your foot down. A good landlord needs to be able to enforce rules in a non-confrontational, yet assertive way. If you struggle with doing that in your day-to-day life, you will probably struggle as a landlord.
We have been working in the Raleigh property management industry for over 30 years. What we see again and again in clients who are ultimately successful is that they approach property investing as a job, not as an escape from one. Even with the help of a property management company, being a landlord is a 24/7 commitment. Just like pursuing an expensive education, it’s a long, tough road with a big payoff—it’s not the “easy way out!”
For that reason, you will need one more quality to become a successful landlord: optimism. If you can’t weather ups and downs with courage and calm, you’re better off staying at a safer harbor.
"Let each of you look not only to his own interests,
but also to the interests of others..."