After living in a condo for 2 years, I pulled the plug and became a landlord and turned the condo into an investment property. I purchased the property knowing that I’d eventually rent it out.
I’ll post updates as I become more familiar with the ins and outs and any other struggles, but so far so good. Look for this addition in the passive income reports section.
Pulling The Trigger
Personally, I want to point out that becoming a landlord isn’t for the faint of heart as almost any other person that’s a rental property investor will tell you. I debated for a while if this was something I really wanted, weighing out the pros and cons of things that could potentially go wrong. As this is my first property rental, there’s a lot that I didn’t know (and probably still don’t).
That being said, things can always go wrong. That’s life. I was willing to take a shot and at least try this thing out at least once! If it works out, great! If not, then I can only hope the escape hatch is within an arms reach! It took a personal event to force me to finally take the leap out of the condo and put it on the market.
Knowing a few property investors who were already landlords helped me gain peace of mind. You just imagine all of the things that can go wrong and then when doing research you read all of the horror stories on the internet. But that’s the internet and of course anything can happen in this world. Where there’s bad, there’s also a lot of good.
There are also many things that you end up learning. For example:
- Giving up equity – If you hire a realtor to rent your property, you will have to give up typically 1 months rent. This is a real problem if your margins are slim and the lease terms are not that long. On top of that, if you don’t want to be a landlord, then you need to give up more cash for a property manager! Ugh…
- Numbers have to be right – Typically, you shouldn’t rent your property if you aren’t getting over 1% of your purchased property value in rent. There seems to be some debate here, but it’s just a general rule of thumb.
- Renter selection – Finding renters on your own is hard and finicky if you don’t have a flexible schedule. When people are ready to find a place, they’re ready! Also, you don’t want to choose wrong!
- Know your rights – Having an LLC is not that useful, unless you own many properties. This is the case in Illinois at least. Insuring yourself properly is the key. Plus, there’s a laundry list of items you should be aware of specific to your county and township.
These are just some of the items you need to be aware of. I can see how once you get the hang of it and money starts rolling in, you might be okay with all of the b.s. that might come with it.
The Tenant Search
Initially, I really had no idea how to begin looking for a renter. I was a bit weary of Craigslist, but I also used it to find my own places in the past. In the end, Zillow was the key. There were a few other places that the unit was posted, but Zillow was by far the easiest process for the Chicago-land area.
Zillow ended up helping me:
- List the unit/condo
- Set up an application process to screen tenants
- Find a tenant
- Provide move-in/move-out checklist printable sheets
- Set up a payment method between the tenant and the landlord (myself)
Now, I have a nice family occupying the property and I’m crossing my fingers that no catastrophic events happen anytime soon.
Final Thoughts on Becoming a Landlord
Becoming a landlord isn’t for everyone. There are a lot of ins and outs of real estate investment that you need to be aware of. I tried to gain as much knowledge from others as I could before jumping into this and I’d suggest the same to anyone else. The more you know, the better prepared you’ll be if anything happens.
That being said, owning an investment property doesn’t mean you need to deal with the tenants if things go wrong. Go ahead and hire a management company and they’ll take that responsibility off your hands! They’ll also take a rake, typically 10% off the top!
As I write this I’m waiting for the first electronic payment to process. Crossing my fingers that the money clears and I don’t hear from the tenants for a long time! Wish me luck!