The economy has been growing for some time, but we are entering a new age of uncertainty. It’s becoming more and more important to keep saving and investing to build a retirement nest egg. But hard work alone won’t get you from where you are to where you need to be. If you’re going to create real wealth on a reasonable schedule, you’ll need more sources of passive income.
Passive income is a powerful way to increase your earnings and savings without significantly increasing your workload. It can help you magnify your income and put more and more money into your investments, where the power of compound interest will further increase your wealth. Passive income creates a virtuous cycle, and one of the best ways to get that cycle started is to find passive income in the form of a rental property.
Rental properties help grow your wealth in two ways at once. Like other real estate properties, they can increase in value over time and therefore effectively increase your wealth. On top of that, rental properties can help you generate a regular income through rent — which is why they are often called “income properties.”
In this modern economy, it pays to be a landlord. Lots of people are renting, and you need passive income. But how can you become a landlord? Is it as simple as buying a property? Well, not quite. Here’s what you need to know.
Do your research
Before you get involved in owning income property, you need to know your stuff. You need to know the area and the real estate market, including the home-buying and rental markets. You need to know how things are zoned and what sorts of state and local laws will affect you as a landlord. You need to know as much as possible about the specific property that you’re considering, too — its condition, any legal issues with owning or renting it, and how it compares to housing stock in the area.
You’ll want to look inward, too. Do you have the right temperament for being a landlord? Do you have the cash on hand that it will take to buy and care for the property in question? Do you have a healthy emergency fund and other savings to help you weather any potential lean times after you put a lot of your wealth into a property?
If you’re sure you’re ready, the next step is to make your purchase.
Buy a property and lawyer up
You’ll need a lawyer to help you close the real estate deal that puts your income property in your hands. You’ll also want a lawyer to help you set up your fledgling rental business.
Insulate your personal wealth as much as possible from your new real estate holding and its associated rental business. And have your lawyer run through potential legal hang-ups with you. You’ll want to make sure that you have the right landlord insurance and are avoiding taking on too much legal liability. And you’ll want to make sure that you’ll be using the right lease and properly understand all of your legal obligations as a landlord.
Get help and maintain your property
You’re ready to rent your property now! But finding, background-checking, and signing the right tenants can be a chore. It’s a good idea to make your life easier by using landlord software solutions. Fortunately, great free options are online.
You’ll want to be proactive about maintaining your property, too. Preventative maintenance will cost you less in the long run than waiting to fix things as they break down. Lower costs will mean greater profits, so be careful about your property management tasks. This is another place where software can help you. You’ll find great free property management software solutions online.
Choose your tenants carefully, and make full use of background checks to screen out potential problem tenants. From there, you should be able to start earning passive income — and building greater wealth.