In a day and age when both rents seem outta wack (read: way high) but loan rates seem equivalently outta wack (read: historically low), to follow are the pros and cons, or the likely benefits and potential headaches, of landlording.
Personally my journey to becoming a landlord was fairly accidental and organic. My (then fiance but shortly thereafter) wife and I purchased a little single shotgun Uptown in the late 90s only to move out of state within the year. We didn’t want to re-sell so we leased it out, and for 3 years we kept the same tenant which in turn paid our note and then some for miscellaneous upkeep. When we returned to re-occupy the space in 2001, a little while later we felt we kinda missed managing an income producing investment. In short order we made the leap proper and bought a duplex in early 2002, and we’ve been in the business since. So if you wanna be a landlord…
(1) Be ready to vet. Never never never take an application or deposit without vetting the party submitting. If some one tries to rush you, that’s a flag. Go the route of credit and background checks always, and only rarely will you be surprised. Because after all you can still be surprised. Lastly, don’t be afraid to troll Facebook or Twitter either.
(2) Be ready to be available. Communication is key. Landlording is not Monday through Friday 9 to 5. It’s late night texts about lost keys and caved in ceilings. It’s evacuations and appliance management. It’s calling the cops some times, and maybe emailing your city councilperson others. It behooves you to be communicative; this is your money you’re investing here.
(3) It helps if you’re handy. Vendors cost money, and good vendors cost real money. You are likely not a vendor, but maybe you know a guy, or know a guy that knows a guy. But that only goes so far. Thank goodness for YouTube and helpful neighbors with tools available you’ll likely only need every so often.
(4) Occupancy. There’s (usually) always some one around, and that’s a good thing. For insurance purposes, but just practicality too. This peace of mind happens most with owner occupied multis especially if you’re prone to travel whether for work or pleasure. It’s always nice to know some one might be there to sign for UPS or feed the chickens.
(5) Asset v liability. A single family home is a liability, but a multi is an asset. What if you lost your job tomorrow, and you own a single? Better be in queue for another job shortly or have a cash reserve. But if you have income coming in from your tenant, that’s at least something, and very often it pays more than half the note.
(6) Predicting the future. It is likely you won’t live in this multi for more than 3 to 5 years, and who knows, you just might get transferred to Houston or Des Moines in 6 months. Don’t fret. Just rent out your unit and maybe hire a property manager too. You liked New Orleans enough to buy in it, so it likely isn’t your first choice to leave her in the dust. Don’t re-sell. You’ll be back. And hey, if in another 3 to 5 years a return to New Orleans doesn’t seem in the cards, sell then.
(7) Specifics in the lease. Who is responsible for what and by when? Are you paying the water bill or is your tenant? What about pest control? What about in the event of an evacuation? Lay it all out there so there’s few if any questions of clarity for any given situation. And the coup de gras of all lease terms: pets! What, if any, do you allow? Avoid the slippery slope as often as possible and be unwavering.
(8) Keep it square. If, for example, you lease to a restauranteur and they invite you to dine in their establishment, go if you like but pay the bill. Even if no bill surfaces. You aren’t in the bartering business, and neither is your mortgage company. So next month when your foodie tenant is late or shorts you on the rent, it ain’t cool. Always better to keep it square or avoid situations such as these as they can be a Pandora’s box.
(9) Go with your gut. It’s usually right. If you don’t feel right about a tenant application, move on; there are other fish. But keep in mind a bad credit doesn’t make for a bad app, and conversely good credit doesn’t mean a green light. Call the references. Study the language used on the app. A tenant should be viewed as a whole package, not just they have huge student debt or have the world’s best pooch (because all tenants have that).
(10) Be real. If landlording isn’t for you after you’ve taken a taste, get out. But give it a go, I say. However if it’s a swing and hit, enjoy it. It can be a great way to build your future wealth, plus believe it or not, it can be a great way to network. And in this town and 2 degrees of separation, that sometimes may mean everything.
Jean-Paul Villere is the owner of Villere Realty and Du Mois Gallery on Freret Street and a married father of four girls. In addition to his Wednesday column at UptownMessenger.com, he also shares his family’s adventures sometimes via pedicab or bicycle on Facebook, Twitter, and YouTube.