Whether you’re a commercial investor focused on NNN property investments, or a residential property investor focused on a buy-and-hold strategy, you have a lot of things to consider. Becoming a landlord of an NNN property is much easier to deal with as you basically hand over the running of the property to the tenant. However, investing in residential properties and building up a portfolio of rentals can be very satisfying, which is why many investors choose to go down this route instead. Whichever market you want to invest in, you’ll want to make sure you do your research beforehand. Keep reading for a guide that will help you through the process.
Know the Law
First and foremost, you will want to hire a lawyer unless you are well versed in state property law. A lawyer will help to draw up documents and contracts to ensure that your rental is completely above board. The last thing you want to do is violate the Fair Credit Reporting Act or the Fair Housing Act as fines can be extremely costly.
Being a landlord comes with some heavy legal responsibilities, with one of the main being that you cannot discriminate against tenants for anything other than their credit score. You will, therefore, want to have a written contract in place which explains what you expect from your tenants and what they are to expect from you in return. Hiring a property management company is one way of dealing with this, however, remember that the law is different for commercial and residential properties so it’s vital to ensure they know what they are doing.
Keep Your Finances In Order
If you are purchasing an investment property with the help of a mortgage, it is vital that you keep enough money aside to pay your mortgage. The reason for this is two-fold.
For starters, depending on the area where you choose to purchase a property, you may have periods of time where you won’t have any tenants. You can try to alleviate this as much as possible by researching commercial hotspots or locations where rental properties are scarce, but even after doing this you may have periods of inoccupancy.
Secondly, there is always a chance that you will let to tenants who are unable to pay their rent or choose not to. If you are renting a commercial property, the business may go through a tough time and not be able to keep up with their rental payments. And if you are renting a residential property, you may have a similar scenario. The eviction process can take time, and if you are relying on the rent to pay your mortgage you will be in financial difficulty.
To save problems from happening, make sure you keep enough money aside to cover any repayments you have to make.
Communication Skills Are Essential
Finally, unless you plan on handing over the running of your properties to a rental agency, you’ll want to brush up on your communication skills. You’ll need to have a certain level of tolerance and flexibility and know how to deal with each situation as it arises.
You have to know when to play hardball and when to play softball, depending on the situation that is facing you. Some tenants won’t be good, and will try to take advantage of you. You’ll want to deal with people like this in a different way to someone who has always paid their rent on time and fallen upon financial difficulties. Finding the balance is key.
Remember, too, that investing in rental property is not something you can just sit back on and ignore. It will require effort on your part and you will be required to do things for your tenants. Make sure you have the time to do this unless you want to run into legal issues.
Becoming a landlord can be a great business decision, but it is not as easy as it first sounds.