Three Questions All New Landlords Must Ask Themselves When Growing A Property Portfolio
Being a landlord isn't easy, and if you're new to the property development game, you will likely make a few mistakes along the way. However, while knowledge comes with experience, it's important you don't make too many hiccups in the early stages as this can have a huge impact on your profit. Therefore, ask yourself the three questions below to help you navigate the early stages of being a landlord:
Should I Hire a Letting Agent to Manage My Property?
One of the major decisions you'll have to make when putting your property up for rent is whether or not to use a letting agent. Some landlords see letting agency fees as a leak in their profits; however, the services offered by a letting agent can let you rest easily knowing your property is being looked after. When it comes down to making this decision, it's all about your preferences, so answer the following questions when weighing up your options:
Do you live close to the property? - If not, it may be difficult to give your tenants the attention they need, which can lead to disputes down the line.
Do you plan on expanding your portfolio? - If you plan on buying more apartments to add to your portfolio, it's best to have a letting agent look after your properties as it may become difficult to keep tabs on each apartment.
Do you have previous experience as a landlord? - If you've previously leased a property, then you likely have a good idea of what is expected of you. If this is your first time, however, you should consider using a letting agent as they will provide a buffer between you and your tenants, ensuring you don't promise things you can't deliver.
If you do decide to use a letting agent, make sure you choose the right one. Letting agent's fees can be expensive, so it's important to shop around and make sure you are getting good value for your money.
What Kind of Tenant Do I Want to Attract?
As a new landlord, it's understandable that you'll want to get your property leased as quickly as possible. An empty property will eat away at your savings, so you won't want to leave your property without a tenant for any lengthy periods of time. However, it's also important to ensure that you choose the right tenant, so it may be worth spending a little extra time to find a suitable person.
Some questions to ask yourself include:
What is the neighborhood like and what type of tenant would be suitable for the area?
Am I willing to give good tenants some leeway (such as with pets or smoking) to ensure a long and happy relationship?
Am I willing to have an "open door" policy and respond to my tenants at all times? Or should I allow a letting agent to deal with this?
Am I Looking for a Short-term or Long-term Investment?
Before buying a property, it's important to establish exactly what your goals are and have some idea about how you are going to achieve them. The key to this is to determine whether you are in the property market for short-term gain, or whether you are looking for a long-term investment that will pay you residual income for years to come.
Many budding property developers see the property market as a short-term game. They rely on market growth to make them a quick profit, and if this doesn't happen, they cut their losses and exit as quickly as possible. In the majority of cases, this is the wrong attitude, and you shouldn't look at your new property as a chance to make a quick profit. While it is possible for investors to make substantial short-term profits in the property market, it is difficult to do so and should only be considered once you have a foot on the ladder and have a good understanding of rapidly varying inflation rates.
As a new landlord, you should look at your property as a long-term investment. This may not make you substantial profits in the short-term, but the residual income from regular rent payments should give your monthly earnings a nice boost. Then, when the time is right, you can sell your property for a nice profit down the line. For more information, consider talking to a real estate attorney, such asIannello Anderson.