You’ve finally made it. After years of saving, you, and possibly your spouse, have saved enough money to buy your first rental property. How exciting!
Becoming a new landowner is one of the most arresting dreams that a lot of people have.
“Wouldn’t it be wonderful to own an extra property that we can rent out, and that can earn us extra income without us having to do much for it?”
With money in the bank, and a favorite estate in mind, both of you are ready to make the leap. Before you do so, however, there are certain things you should know about buying the estate.
It’s possible to lose money from rental properties
There, I said it. Some people actually lose money from the rental properties that they buy.
It’s a common myth that choosing an estate to rent is easy, and that if there is a market for it, then you’re guaranteed to profit from it.
You might have the most good-looking apartment in the most popular area of town, but if moisture damages occur, and you have to pay tens of thousands of dollars to fix it, wouldn’t that be a poor investment?
Things like this do happen, so it’s important to research the property thoroughly before you buy it.
Some tenants are troublesome
After you’ve secured a good quality residence, it might feel like you’ve got it all under control. Don’t.
One of the most common sticks that jam people’s metaphorical rental bikes, is the fact that some tenants are quite a hassle. They don’t pay on time, they might break things and don’t pay for them, or they might play loud music during the night.
Therefore I urge you to do as you did with your estate: research your tenants. Perform an interview with them, or find another way to get to know certain facts about them that will be central to their stay in your apartment.
One of the best ways to secure a good relationship with your tenant is to make a clear, written contract about what’s to be expected of both parties during the tenant’s stay. Businesses in many countries offer free digital leases that are easy to use. For example, Presis Utleie in Norway gives people access to a safe rental contract (leiekontrakt in Norwegian) which is said to be one of the simplest and safest in the country. Here the owners of properties can send the contract to their tenant digitally to sign. This makes the process hassle free and easy, and you as a landlord end up with a proper contract with clear terms.
Whether you use a ready to go contract like the one above, or you write your own, make sure you are covered in every possible way, and that you follow the proper laws in your area.
What will you do with your extra income?
So you’ve gotten a great place to rent, and you’ve found the perfect tenant – one who is responsible, and heeds every point in the lease you both signed.
The question is now, what will you do with the extra income you get from your second property?
A common mistake people make is not having a plan for how they will use their additional stream of income. Often, this leads to a phenomenon which occurs way too often among people who start earning more money: their expenses rise to meet their rise in income.
Having a plan about what dreams you’ll pursue or what investments you’ll make will help you a long way of putting your extra cash into good use.