| Hi Taylor:
I'm getting more and more into the idea of buying a property
I can rent to make some passive income. I know you have experience
with this kind of thing, so be real with me: how hard is it? Will
I be in over my head? - Garrison
Hi Garrison: I've found that rental properties, and real estate
in general, fall neatly under the "Where there's a will, there's a
way" umbrella. If you really want to make it happen, there's no reason
you can't get out there and do it.
When people struggle with rental properties, it's usually because
they aren't fully prepared. Here are three things you need to be mindful
of before you take the plunge.
expenses are constant. Whether you buy the property in cash
or take on a mortgage, you're still going to be shelling out money.
Repairs, upgrades, taxes, insurance it's all the same stuff
regular homeowners deal with, but as a landlord you don't get
to put things off the way you might with your own home upkeep.
Before you start getting excited about the inflow of money, make
sure you budget enough for monthly outflow.
2. Not all tenants are created equal. I'm a huge advocate
of rental properties, but I know this investment isn't for everyone.
You can end up with a renter who never pays on time, who has nine
cats even though you put "no pets" in the agreement, who tries
to nickel and dime you over every little thing. I feel like the
majority of Judge Judy's cases feature landlords and their delinquent
tenants. Most renters are good, honest people, but you can't expect
that without at least preparing to get someone who ends up being
a bit of a headache. You also need to be covered with liability
insurance, otherwise you might be dealing with a costly lawsuit
over something as trivial as a leaky faucet.
3. Education is required. You don't have to go back to school
and get a degree, but if you want to really succeed in this endeavor,
you need to have a good grasp of tax codes, local renting laws,
and everything in between. You'll definitely learn by doing, but
the more information you can absorb before buying the property,
the better off you'll be. Read some books, listen to some podcasts,
write letters to your favorite financial advisors ;). All that
prep work will make you feel much more confident when you actually
start in on the process.
| There's never
a bad time to own a good property, and one rental can quickly lead
to a second and third. As long as you have a sense of what to expect,
I think it's a great move. Good luck!
© Taylor Kovar
December 15, 2021
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Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.