You might hear about a friend of a friend who bought a house and is renting it out to make some extra income. You might also hear that this person just sits back and collects the rent check every month, goes fishing most of the time and you think, what a great idea! Sounds like a no-brainer right?
Buying a house to rent or turning your own house into a rental instead of selling can be a good way to make some passive income. It can also be a way to cover the mortgage on an investment property. BUT . . . there are a lot of issues you need to consider before you decide to become a landlord. There are two ways to approach renting your property: you can be the landlord yourself or you can hire a property management company to oversee the property. If you try to do it yourself, remember that your property will need to be maintained and you have to be aware of all the expenses that include: repairs, landscaping maintenance, costs between tenants, painting, new carpet, cleaning , utilities, insurance, advertising, real estate fees etc.
You will also have to take into account the possibility of getting a tenant who does not work out. And there may be times that you cannot rent your house for a month or more between tenants. If you plan to make your house a vacation rental, you need to be courteous to your neighbors and assure them that there will not be all-night wild parties going on every weekend and in many of our condos in Freeport the condo rules only allow longer term rentals as stipulated in the by-laws. There is a controversy about the Port Authority Restrictive convenants about the legality of renting your homes like people do all around the world. In fact ABACO has developed a huge 2nd home rental property industry. BREA and many concerned people are dealing with this issue as we speak.
You may want to use the services of a good property management company if you want to reduce your personal involvement with the management of your rental. It will affect your profit but they will handle the day to day maintenance and any unusual problems that may come up.
If you do decide to become landlord, keep in mind that exclusive of your monthly mortgage payments, the average cost of renting your home may be approximately 20% of your income. Using a property management firm could add an additional 10%. You need to take all of these numbers into account when setting your rental rate. You should also consider your cash flow situation. It is often difficult to break even or show a profit from your rental income for the first few years that you own an investment property. However, the property will appreciate while you own it, and you will build up equity each year.
If you are planning to become a landlord, consult a Realtor and a good accountant to help you make an informed investment purchase; it can be a real way to make some extra income and pay off that mortgage on your investment property or future retirement home. If the Sunwing energy continues many of these people may be interested in spending more time here and may become your new tenants. Until next week…