3 Things to Consider Before Becoming a Landlord in Los Angeles
Property ownership is one of the best investments a person can make. It’s a passive form of income that nets monthly profits, while potentially generating long-term wealth for property owners. While there are many ways property owners can profit from real estate, one of the most popular forms of income generation is renting out your property and becoming a landlord. For many, the landlord/tenant relationship can be mutually beneficial. Renters can provide a steady source of income for property owners and property owners can generate income from their property until they are ready to sell. While there are many benefits to renting your property, here are three things you should consider before becoming a landlord.
1. What Type of Landlord Do You Want to Be?
It’s a simple question, but an important one. What are your reasons for becoming a landlord? Do you need to rent your property because you cannot sell your home for the price you need? If this is your reason, then renting your property can be an excellent short-term solution until you are ready to sell your property. Just be sure to budget for repairs on the property.
Do you want to invest in real estate as your main source of income? If you have never rented out your property before, consider purchasing a duplex and renting out the other half before becoming a professional landlord. While this won’t replace your day job, it can create a nice nest egg while you increase your portfolio.
2. Can You Afford It?
While there are many reasons why you want to become a landlord, one of the most popular reasons property owners pursue it is for passive income generation. But before becoming a landlord, there are many things to take into consideration–including the cost. Can you afford to purchase a rental property? If you have never purchased a second home before, many lending institutions will not only consider your ability to pay down your current mortgage, but your ability to pay for an additional mortgage, should your rental property be vacant for whatever reason. Securing financing for a rental property may also be more difficult, since many lenders require larger down payments.
Going beyond the purchase of the property, there are additional expenses to consider as a landlord. Tenants can be expensive. If your property does not meet certain standards, you will have to invest a lot of money in the property before you can rent it out. Can you afford repairs on the property? What about the damage the tenants cause? Security deposits don’t cover everything. Can you pay for repairs beyond the cost of the security deposit? And if you have to pursue eviction, can you afford the legal fees? You need to take these things into consideration before becoming a landlord.
3. Pay Attention to Local Laws
One of the most overlooked, yet important, aspects of property rental is considering the legality associated with being a landlord. Los Angeles landlords are legally obligated to follow city, county, state, and federal ordinances when renting their properties. Become familiar with these laws. Have a real estate attorney draw up your rental agreement and lease. This will prevent contentious, expensive lawsuits later.
While there are many factors to take into consideration, becoming a landlord can be a very rewarding experience. For more information on how to become a landlord or property manager, please contact us at King George Property Management today.