Are you ready to become a landlord?
For many, homeownership is seen as the ultimate success, and owning investment property the path to building wealth for the future. Before you decide to take the plunge into the world of rental properties, it's important to take a close look at your current situation and come up with a realistic plan.
The first step, and one of the most important, is to start thinking about your home as a business. This can be especially hard for people who have lived in the home.
From the moment you decide to become a landlord, you will need to emotionally distance yourself from the property in order to make smart financial decisions.
Speaking of finances, there's a reason investment properties play a role in wealth management. The tax incentives and passive income can set you up for long-term financial success. Mortgage interest, repair costs, and other fees can all be deducted from your yearly taxes while you continue to grow the equity in your home. A smart landlord will set up a reserve account to handle any expenses that may arise, like repairs and vacancy time.
How involved are you willing to be? It's not really passive income if you are having to deal with a plumbing leak on the weekend or market your property for a new tenant. This is where hiring a professional property manager comes in. A full-service property manager will supervise every aspect of the rental process - finding new tenants, staying current on the law, and handling late-night service requests. A good property management company will manage your asset effectively and reduce your potential risks.
If you decide to forgo hiring a professional and make a go of it yourself, having a strong understanding of the myriad details that go into the day-to-day management of investment properties will be necessary to keep you financially sane and out of legal hot water. Know your options, ask questions, and do your research before deciding your level of involvement.
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Diversifying your investment portfolio with rental properties can be a smart financial move when planning for the future and, when done right, can significantly increase your net worth. Still on the fence about becoming a landlord? Contact us today and let us help determine the right path for you!