The rental housing industry can be very profitable and a pathway to greater wealth. However, this industry is not for everyone. Many people get into the rental business and think it’s as easy as signing a lease, handing over the keys, and then sitting back and collecting the rent.
That couldn’t be farther from the reality of owning income property.
Investment property, especially when you are self-managing like most RHAWA members, takes a lot of work and planning, especially the planning ahead. If you are considering buying an income property or have suddenly found yourself with investment property we’ve compiled some helpful items to help you understand just what is involved in rental housing and how to get ready for your rental housing journey.
Property investment is a business
Many people don’t consider their rental property business as a real business! Some landlords will dismissively say, “Oh, I just own a duplex” and “Yeah, I just rent out my last house.” As soon as you are signing leases with a tenant and taking rent money, you have a business; even if it’s just 1 house. That means that you have to treat it like a business. You have to keep good documentation, especially when filling out things like the Property Condition Report and conducting move-outs. Joining an organization like RHAWA gives you access to the resource desk, forms, and all of the education that can help you make smart decisions about your business.
Most investment property is fairly passive, but it’s important to get the active parts of the business right. Having a tenant file and keeping a tenant ledger is important, especially if there is ever a legal dispute (you have to be prepared for that, more on that later). On the bright side, a little bit of organization and preparation can make running your rental housing business easy.
Rental housing is fundamentally a people business and that means that sometimes you might get a call about a maintenance emergency or a lockout or other problem at 2:00 A.M. that needs to be solved. Being a landlord can be a 24/7 business at times. Patience even extends to landing the right tenant and waiting for the right application to come in for a truly qualified tenant.
While rare, you might have to take someone to small claims court or start an eviction process. It’s always shocking when people who have chosen to be housing providers avoid taking necessary legal steps or announce, “I don’t want any legal troubles” or “I hate dealing with lawyers.” The reality is that real estate a regulated industry and in Washington we have state landlord-tenant laws as well as municipal ordinances that govern this industry. If you are in the rental property industry, it is best to become familiar with a good lawyer (see the RHAWA Vendor Directory) and to know that at some point, you may have to make use of the court system.
Budget, budget, budget
Self-managing your income property is much more than just signing a lease and collecting the rent. Rental properties require more maintenance than when they are owner-occupied and even small things can add up quickly depending on the age of the property and other factors. The easiest way to prepare for these things is to budget in advance. Laying some money aside each month from your rental income is vital to make sure that when a major repair is required or it is time to turn your property, you have all the necessary funds to make any needed repairs or replace worn out items like appliances and carpet. If you know you have aging appliances, thinking about that in advance can allow you to take advantage of great deals. If you own more than on property, having a spare oven and range can be helpful to bridge the gap when an appliance does goes out. In order to do that well, you have to plan ahead and budget.
Is landlording for you? Only you can decide but if you think about these factors and find a great partner like RHAWA, then you can have a successful rental housing journey.