It’s never advisable to fully immerse yourself in a new field without getting your feet wet first. The same principle applies when you’re investing in real estate and becoming a full-time landlord. You will first need to invest in one or two properties before making the move completely.
How should you go about the transition to a full-time landlord? In this article, the team from Limestone Country Properties advises rental property owners on how to best go about this.
Advantages of Being a Full-Time Landlord
There are several benefits that attract individuals to property ownership and leasing. Some of the benefits include:
- Monthly Cash Flow: Once you’ve invested in the right property and quality management, you can be assured of a continuous stream of income from your rental properties. With good management and reduced property expenses, you can maximize income and hit your expected ROI.
- Flexibility: While guaranteed cash flow is good, a flexible lifestyle is better. When you’re a full-time landlord, you can put in the hours whenever it’s most convenient for you. As your own employer, you’re in charge of your own time.
- Tax Breaks: State and federal laws are set up to give property owners several tax deductions. As you file your taxes, you can deduct depreciation, mortgage repayments, and property maintenance expenses from the taxable income.
- Appreciation in Value: When you’ve invested in a vibrant property market with good rental demand, you can expect the value of your property to increase over the years.
Tips for a Smooth Transition
Choosing to quit a stable job and enter the ‘unknowns’ of entrepreneurship can give one a headache. While the reward might be great, you must plan your way to that level.
Here are some tips that have helped our clients in the past:
Stockpile Cash
Real estate investment is touted to be a stable, passive source of income, however, it can have some level of volatility and unexpected cash demands, especially when you have a vacant unit or are dealing with a problematic tenant.
As you’re thinking of making the move to a full-time landlord, consider saving on cash for about 18 to 24 months. The rationale behind this is simple. Without your other 9-to-5 job, you’ll be relying on the income from your rental property to see your living costs and other needs.
This means rent, fuel, utilities, groceries, healthcare, and insurance among others. These savings will allow you to sort out your living expenses before everything straightens out.
During this transition, we recommend that you cut out luxury and expensive purchases that you might typically make. This move will give you more cash to work with and also more leeway should there be an extra need for money on your rental property.
The Need for a Portfolio
Before you make the move to be a full-time landlord, consider adding several properties to your name. This will give you a perspective of the performance of the market and also a feel of whether you were meant to be a landlord or not.
When creating a portfolio, we advise that you diversify your investment. Don’t purchase all your rental properties in one neighborhood despite the attractive price bracket.
For example, you can choose to invest in a luxury condo in the downtown area, student accommodation, and a single-family residence in a middle-income neighborhood. Diversifying reduces your total risk margin.
Look for a Mentor
Being relatively fresh to the world of real estate, you’ll need somebody to show you the ropes. You’ll need to work with people who have more localized experience and expertise on the matter.
Where can you find a mentor? Since you already have a property in your name, attend one of the Homeowner’s Association (HOA) meetings. You’ll rub shoulders with more experienced landlords in your neighborhood and they’ll advise you on what you should prioritize as a part-time landlord.
Furthermore, more experienced landlords will have access to good opportunities, networks, and deals that aren’t shared openly.
Keep All Options Open
One reason that has pushed you to be a full-time landlord could be the poor culture at the office. Regardless of the situation, you should maintain the connections that you’ve gained from your previous employment.
Do your best to ensure that you leave the company on good terms. If possible, drop a hint that you’re moving into the real estate business.
You could find your first tenant from your previous job and save yourself hundreds of dollars in property marketing and screening.
Your previous boss could be looking for their next investment idea. They could be your next partner helping you expand your property portfolio.
Add More Properties
Focus on adding more properties to your portfolio. This allows you to enjoy the full benefits of real property investment and also scale up your income drastically. As you spend more time in the market, you’ll be able to easily spot the patterns and well-performing neighborhoods.
Conclusion
Even with all the tips that we’ve shared above, you might find self-property management to be quite hectic with late-night calls from tenants and compliance demands from county and State authorities.
To help you with the management of your property and maximize your rental income, get in touch with Limestone Country Properties! We’re a full-service property management company offering comprehensive management solutions.
Our team implements a full range of services from rent collection to tenant screening to legal compliance. Get in touch with us today!
