15 Signs You're Ready to Become a Landlord

Owning rental properties can be a great way to invest in real estate. As tenants pay your monthly rent, you'll ideally have steady and predictable income coming in. You'll also benefit from property appreciation if property values rise. So your investment can pay off in two ways.

Rental property ownership is not for everyone, though, as there is a lot involved in managing this type of investment. To decide whether you're ready to take on this role, watch for these 15 signs.

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It's possible to buy an investment property with no money down, but it can be harder to do so.

Ideally, you'll want to make sure you have a reasonable sum of money to put down on the property to maximize the chances of being able to borrow for it at an affordable rate.

Depending on your real estate investing goals, it may even benefit you to try to save enough to offer cash for properties that sellers need to unload quickly so you can get good deals.

ALSO READ: How to Buy an Investment Property With No Money Down

If you're borrowing to buy a rental property, you'll want to ensure your financial credentials are in order.

If you have poor credit, lots of debt with limited income, or other red flags, you may not get the loan you need or may have to pay a high rate, eating into any potential profits.

Buying a rental property as an investment is very different from purchasing a place you'll live in.

You shouldn't be focused on whether you personally like the features of the rental properties you're looking at. Instead, you'll need to objectively assess the key issues determining whether the property will be profitable, including prevailing market rents and vacancy rates for similar rental properties.

ALSO READ: Why You Should Buy an Investment Property in This Booming City

Becoming a landlord is not a hands-off investment. It takes time, effort, and knowledge.

You'll need to spend time searching for a property to buy and going through the process of actually purchasing it. And you'll need to invest your time in either managing the property yourself or finding a company to do it for you and ensuring they are handling everything properly.

Speaking of managing a rental property, you need to think carefully about how this process will be handled.

If you manage the property yourself, you'll have to be prepared to set the rent, market it, show it to potential tenants, and do a whole lot more once the renters move in.

If you hire someone, on the other hand, you'll need to research to find the right company and make sure you can count on them. You'll still want to oversee how they are managing the property to ensure all goes well. And you will reduce your profits considerably by paying their fees.

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Tenants can create all kinds of problems for landlords. You may have people who are late with rent or don't pay at all. Your tenants may have loud parties, and the police may need to be called. Or one tenant may complain about others.

A property management company can handle some of these issues for you, but you'll be on your own if you're self-managing.

And ultimately, it is your investment that could be affected when issues arise, so you'll still need to spend time making sure all is well, even if professional management services are in place.

ALSO READ: Is Owning a Rental Property a Nightmare Dressed Like a Daydream?

If your property is vacant, you'll be responsible for covering the costs without rent coming in. Obviously, you want this to happen as little as possible. That's why landlords need an effective strategy to market their rentals to potential tenants.

If you don't know how to make your rental seem desirable and attract people to live there, your investment isn't likely to pay off for you.

Before allowing someone to move into a property you own, you want to make sure they will pay on time. And you'll also want to confirm that they aren't likely to mistreat the space or create serious issues, such as selling drugs out of the home.

That means you'll need a plan to screen tenants and will have to spend the time carrying it out. This could mean checking their credit, their references, and more.

ALSO READ: 5 Most Common Issues Landlords Run Into During Tenant Screenings

Landlords are responsible for dealing with any problems that arise in rental properties. This means you could get calls at 2 a.m. when plumbing problems happen or may be forced to pay thousands of dollars for a new roof after a leak.

Even if you have a property management company to arrange repairs for you, you will still be financially on the hook for them. So, you need to be ready for the cost and possibly the time involved.

There are different laws governing the landlord-tenant relationship across the states. In some cases, the laws are favorable to tenants and impose many restrictions and requirements on landlords. It's important not to run afoul of the law, so you shouldn't become a landlord until you know exactly what your rights and obligations are.

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Taxes on real estate investing can be complicated. Obviously, you'll have property taxes to pay. And you must pay taxes on any income your property generates for you.

But you could also reduce your IRS bill by doing things like structuring your real estate investing company as the right type of business entity or by making sure you claim all deductions due to property owners.

Since your taxes can become a lot more confusing, you need to confirm you understand the relevant rules before buying.

ALSO READ: What Are the Tax Benefits of Real Estate Investing?

Ultimately, as a landlord, you are inviting people into properties you own and trusting them to treat the space right. If you don't want to take on that risk, owning rentals may not be the best method of investing in real estate for you.

If you're hoping that owning rental properties will make you rich quickly, turning you into a millionaire with little effort, chances are you are going to be disappointed.

Before you dive into becoming a landlord, you want to set realistic expectations for how well your investment will perform. That way, you can decide whether the time and energy are worth it.

ALSO READ: Real Estate Investor Salary: How Much Do Real Estate Investors Really Make?

You may need both accounting and legal help after becoming a landlord. This can start with hiring a lawyer to review the purchase agreement and consulting with an accountant or attorney to decide whether to invest as a sole proprietorship, S corp, or other entity.

If you don't know how to find professionals to help or aren't willing to pay for them when you need advice, rental property ownership may not be for you.

Owning rental properties is not the only way to gain exposure to real estate. You could opt for REITs or ETFs that invest within this sector. These other alternatives may be easier, cheaper, and less time-consuming.

You should consider all the different ways to invest before putting money on the line, and don't assume you need to physically own properties to profit from them.

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Hopefully, if you're interested in owning rental properties, you've identified many of these 15 signs that you are ready to take on the responsibilities of becoming a landlord. If so, you may decide it's time to move forward with looking for a property to call your own.

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