Tips for the Prospective Landlord

The advantages to owning real estate are substantial.

Real estate is a tangible asset that can provide income you don’t have to work for. Real estate values frequently appreciate. You can buy with borrowed funds, so you can control an entire property while only paying a fraction of its cost. And rental income may be tax free under the right circumstances.

But for every upside, there’s a downside.

Real estate poses heightened liability. Make sure the property meets all government codes.

Real estate can levy unexpected expenses, like weather damage forcing the need for repairs. You may have bad tenants who don’t pay rent. And if the property is vacant, it’s generating no income.

To neutralize these disadvantages, you can:

• Keep expectations reasonable and don’t plan to buy a new yacht with those rental checks.
• Find a balance between earnings and effort. Property management firms can do the work for you for a percentage of the income.
• Know the federal and state laws that outline your responsibilities and liabilities.
• Have the property inspected.
• Make sure leases are legal.
• Call references and run credit checks on prospective tenants.
• Join the local Landlord Association.
• Make friends with a lawyer, tax pro and banker to increase your holdings.
• Be sure you have the right insurance.
• Create an emergency fund.

Remember, rental property can be an excellent investment, but only if you’re informed.