So, you've decided to dive into real estate with the market at low tide and pick up an investment property or two.
Or, maybe that plan from last fall to buy and flip a three-bedroom Miami condo has turned sour as buyers look for a better deal than you can afford to give.
In any case, get a receipt book and some "For Rent" signs.
You're becoming a landlord.
Renting property is sometimes called mankind's second oldest profession. (Or, in the case of Pearl, the adorable “landlord” depicted in the Will Farrell video make that toddler-kind’s.) It's a nuts-and-bolts business that can be recession-proof if your property is in a desirable area (everybody needs someplace to live, right?), and if you're dealing with a small number of properties in good condition, the time spent on it is usually minimal. ...
If you know what you're doing.
To start, scour the neighborhood rental market to get a going rate for a comparable property and write it down on the left side of a ledger. On the right side, write your mortgage, property taxes, insurance, homeowner's association fees (if any) and 10% to cover maintenance.
After adding those up, the final figure on the right should be at least 5% below the figure on the left, and hopefully more. If not, you've got to decide whether it's worth losing money on a rental house until the equity comes back. Don't feel too bad if you figure out that you're not making a killing right away since on average landlords earn about $2,000 profit per unit each year. And don't sweat the extra income at tax time. Any meager earnings are usually eaten up by deductions for mortgage interest, repairs, transportation, etc.
Making the landlord experience as smooth and easy as possible requires some prep work. Here are five tips to bring in the best tenants possible and start a cash flow: