Every landlord is swimming in cash. All you do is buy a property, find someone to rent to — and bam, you’re loaded!
Real life does NOT work like that. Oh sure, you can create wealth through real estate, but it certainly isn’t a get-rich-quick scheme.
You have this vision that you will buy a property and rent it out. The tenants will pay rent on time every month, cover the mortgage, taxes, and insurance plus put a little into your pocket, and it will be an easy, hands-off way to make money.
It can happen, but you have to put in a lot of upfront work to get easy tenants who pay rent every month on time. You have to buy right in order to have the rent you charge cover all the costs plus put more into your pocket.
I’ve seen many experienced landlords share their mistakes, and many of them are the same mistake.
Let’s skip the School of Hard Knocks today and talk to some of those experienced landlords. Let’s find out the most surprising things they learned when they became landlords.
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Tenants Aren’t Always 100 Percent Truthful
“I think the most surprising thing is just how much you get lied to. I don’t mean to sound like a misanthrope — most people are good. But when you are a landlord, you will get every “my dog ate my homework” or “I don’t have any felonies so why check my background” excuse you could imagine. — Andrew Syrios
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“I tell all people who want to be landlords the most important fact to remember is TENANTS LIE — whether it’s why the rent is late or some other small thing, even if it is not important. TENANTS LIE. You can’t take it personally, it’s just a fact of life. You need to learn to read people so you know when they are lying, and know when to let the lies go because the lie they tell you doesn’t matter — and when to not let them go because that lie does matter.” — Russell Brazil
Midnight Emergency Phone Calls Aren’t That Common
“When I first became a landlord, I remember being surprised at how few middle-of-the-night calls I got. You know — the kind that everyone talks about like they happen every night. In fact, I’ve only had one middle-of-the-night call in the past decade that forced me to get out of bed, with hundreds of tenants.
Do emergencies happen? Definitely, and sometimes they don’t happen between the hours of nine and five. But most problems don’t need to be fixed immediately, and even when they do, it’s usually just a phone call or two to get it fixed. I feel that the ‘middle of the night phone call’ is one of the biggest fears that newbies have that holds them back from buying rental properties — but it’s honestly not a big deal. Besides, even if I have to get up in the middle of the night a few times per decade, somehow I think it’s worth it for the financial freedom I get the rest of the time!” — Brandon Turner
You HAVE to Properly Account for CapEx
“My most surprising lesson as a new landlord was also an expensive one. I learned that repair expenses can eat up all of your yearly cash flow and more. When I started, I wanted so badly to make a deal work that I fudged on the repair expense line item when evaluating a deal. For example, I thought repairs of $50/month on a standard house were reasonable. But it only took one $4,000 HVAC system replacement to dwarf my tiny repair budget! Now I include both maintenance expense and future replacement of capital items — like HVAC, roof, driveways, and more — in my upfront estimates.” — Chad Carson
Tenants Don’t Read the Fine (And Not-So-Fine) Print
“Tenants don’t read. I have posted an ad that says, ‘Rent is $1,000 a month. First month’s rent, last month’s rent and one-month’s rent for security deposit due at lease signing. No Pets. Located near Roselle and Golf in Hoffman Estates. Must have at least $3,000 per month in verifiable income and submit to a background check.’
And without fail, I get phone calls asking where the property is located, if I allow pets, how much does it rent for, will I do a background check, and do I require a security deposit?
If you have something you want a tenant to know, tell them in writing, read it to them, and have them initial it that they have read it, so when they say, ‘You never told me that!’ you can show them your proof.” — Mindy Jensen
It Takes Work, But…
“Despite how being a landlord comes with many challenges and inconveniences, the time and effort it takes to be a good landlord is way less than the time and effort it takes working 9-5 making someone else rich.” — Johnny Youssef
And Five More…
- Common sense isn’t common.
- If it isn’t written down, it doesn’t exist.
- Treat people at your rentals like a business customer, not a friend.
- Have a GOOD Banker, and a reserve fund account.
- Your police department is your new best friend. — Deanna McCormick
All the preparation in the world won’t actually prepare you for every situation — because sometimes you just have to scratch your head.
What was the most surprising thing you learned when you became a landlord?
We want to know! Be sure to share with a comment!