Property Management Agreement (image: c-rem.com)
Are you thinking about becoming a landlord? Are you tempted to rent your own properties and manage them as rentals? Well, misconceptions about making money with rentals are very common. Some believe that property management is very difficult and you need specialized skills in order to do it. And some believe it’s very simple. The fact remains that managing rental properties takes energy, time, resource and training.
Let’s look at some of the misconceptions about becoming a landlord:
1) The passive income: Owning and managing rental properties takes work. Even collecting rent from some tenants is a chore. In fact, we just served on Los Gatos tenant with a notice of violation since it was her 3rd month in a row where the rent was late.
So, there is no easy money unless you hire a qualified property management company and pay them a fee from your rental income.
2) Handy Man: If you are a handy man, it might be easier for you to manage your own rentals, but the price you pay is your freedom to enjoy the rental income. Just find a skilled professionals who can get the job done in 1/2 the time it would take you to do it. As long as you have managed your debt service and the rents allow you to hire a professional, then it’s possible to cash flow the property while paying someone else to repair your rentals.
4) Deferred Maintenance: Some tenants believe that their landlords are cheapskates and don’t want to spend any money on repairs. But that’s not the case for most home owner’s whose properties we now manage. Responsible property owners realize that there is a direct relationship between their properties condition and the amount of rent they could charge. They want to provide a safe and pleasant home for their tenants. And they do care about the neighborhoods/
5) False Perception: Many property owners are wealthy, but majority of them are not. Some people become landlords merelly to generate additional income from their home or extra space. Others who inherit a property in a State where they don’t live and have to rent it out.
What other surprises did you find when you started renting your properties?