So, you want to be a rental property owner… the question is, do you know where to start? It’s not as simple as screening tenants or collecting rent. In this article, we’ve put together the top four steps to get started as a South Florida landlord, which are all guaranteed to set you on the right path.
What Does It Mean to Be in the Rental Business?
A rental property business refers to a type of business wherein an investor manages one or more income-generating properties. These properties may be one or more units that are rented out to renters on a monthly or yearly basis. It is not uncommon for real estate investors to seek the services of a property management company that can undertake the tasks that property owners typically do, including collecting rent, screening tenants, and so on.
Things to Know Before Starting a Rental Business
Being a landlord can be lucrative as rent payments from investment properties provide passive income. If you’re getting a mortgage to purchase your rental property, you can put the rental income toward your mortgage – in that way, the property “pays for itself”. Plus, there is a market for it, as nearly a third of American households prefer to rent rather than own a property.
But before you go all-in, it’s important to know what you’re getting yourself into. You need to be prepared to put in the effort, from the moment you screen tenants to the time you sign the legal lease agreements, and through to the moment your tenants leave and find yourself at the start again.
Remember that it’s not easy to be a landlord. It is more complicated than purchasing a property and collecting rent again and again. Managing a rental property needs a great deal of thought.
If you think you’re up for it, we’ve put together a couple of tips to get started:
Step 1. Are You Too Nice?
Ask yourself if you’re too nice. If you are, you’ve got to toughen up otherwise, your tenants will take advantage of your kindness. Bear in mind that, first and foremost, your rental property is a rental business. If a person doesn’t pay their rent on time, you need to ask them to pay up for your sake.
With that said, you also have to take the time to understand the law – every law that is relevant to your real estate investment. You’re going to need to take out your books and do a lot of reading, and we can’t guarantee that it’ll be easy, but it’s critical to your rental business’s success.
If you really are too nice, you can always partner up with a property management company. They’ll be the “face” of your rental business, following up rent, following after tenants who’ve bailed on their rent, and more. They’re like the sidekick you need to get your rental off the ground.
Step 2. Pick Your Market
Ask any realtor and they’ll tell you that the key to real estate success is, as it always has been, “location, location, location”. When purchasing a rental property, it’s important to get the geographical location right as this will determine the demand, the rental rate, and more. In short, where the property is situated can secure its success (or worse – its failure).
To pick a property, you need to first consider the type of property you want to rent out in the future. If you want to rent out single-family homes, a great place to start would be the suburbs in South Florida. However, if you want to rent out condominium units, it would make the most sense to purchase a property in cosmopolitan places such as Miami Beach. A South Florida property management firm can help you identify where you should purchase a property in a way that aligns with your financial goals.‘
Step 3. Figure Out How to Finance It
If you don’t already own a property that you can turn into a rental, the first step to rental property ownership is to purchase a property. Fortunately, it doesn’t have to cost you a fortune. There are plenty of ways to finance your rental property (but if you can afford to buy it outright, by all means, go for it!), which we’ll break down below:
- Conventional loans are loans that you take out when you want to purchase a residential property to rent out. You’ll have to pay a downpayment that’s proportionate to your credit score.
- Second mortgage. If you’re almost done paying your mortgage on your current home, you can get a mortgage against your home’s equity.
As a last resort (i.e. if you can’t get a regular mortgage), you can consider hard money loans, but do be aware that they’re incredibly hard to pay back.
Step 4. Partner With a Property Management Company
You can self-manage your South Florida rental property, but it’s not going to be easy. Bear in mind that being a landlord means you’ve got to dedicate your time to property management, property maintenance, and more. If you work full-time, you likely won’t have enough time to get things done the right way. As a result, your tenants will suffer, and so will the success of your rental property.
That’s why successful property owners partner with a property management company. With property managers by their side, they’re able to put their responsibilities on autopilot but benefit from the same rewards such as financial freedom.
When choosing which property management company to partner with, be sure to go for a reputable one that has served the market for a long time. That’s one way to guarantee that they know what they’re doing and that they can properly manage a property in your particular market.
Partner With the Pros to Get Started as a Landlord
Looking for a property management firm to partner with? Start – and end – your search here. Luxury Property Care’s experts are prepared to provide you with top-of-the-line property management services, guaranteed to generate a high ROI. For more information, call us at (561) 944 – 2992 or complete our contact form.