Being a profitable landlord calls for certain personality traits. If you don’t possess them, no worries! You can develop them. After all, I did.
I got into the rental business by being an accidental landlord (circa 2008). The housing market crashed (remember that?) just as I planned to sell my childhood home. Since the house was worth half as much as it was just months before, I decided to rent it out instead of selling when the market was at its lowest.
But guess what? I was not a profitable landlord.
The experience, however, was worth it. I was able to sell when the market came back, and I learned how to be a profitable landlord (and learned that this was the type of investing for me).
Here are five unexpected traits of a profitable landlord.
1. Profitable Landlords Are Number Crunchers
If you don’t love doing calculations now, once you realize that hunkering down to do a little math can make the difference between making a profit or not, you’ll start to embrace your inner accountant.
When I was an accidental landlord, I was just grateful to get someone in the property, since I didn’t know what I was doing. So when a neighbor recommended a “nice couple” to me who wanted to rent the place, it was theirs. As for rent, I just picked a number out of the air without doing any research. When it was eagerly accepted, I realized the rent I was charging was below market value. Talk about putting the cart before the horse.
Here’s the way a profitable landlord goes about finding investment property:
They find the right property. They do this by looking at what rents are going for in the area they want to buy in, and they find out whether there are lots of vacancies or not.
If an area is riddled with vacant units, maybe you shouldn’t buy there.
Once you know how much rent you can expect to get, you would then need to figure your expenses:
- Property tax
- City tax
- HOA dues
- Maintenance costs
- Vacancy rate (about 8% of the rent)
- Property manager (optional)
Now you can determine whether you’ll have cash flow and how much. Simply subtract your total projected expenses from your total projected income.
Related: Cash is Not King in Real Estate
2. Profitable Landlords Know About Real Estate
A profitable landlord doesn’t need to be a real estate agent, but it helps to know as much about the local areas as real estate agents do.
You need to know what renters want – and usually, that’s location.
Tip: Renters want to be near stuff. Public transportation, dining, shopping, medical buildings or hospitals, and parks are great perks. And suburban families covet a good school district.
Do as much research as you can about an area. If you live nearby, drive around to determine whether the property you’re considering is in a desirable neighborhood. An up-and-coming neighborhood is also good.
- 7 Habits of Highly Profitable Real Estate Investors
- Find Improving Housing Markets with MiMi, from Freddie Mac
3. Profitable Landlords Aren’t Nice (But They Are Fair)
This concept was difficult for me to grasp in my first attempt as a landlord. Don’t get me wrong — I’m not advocating being a jerk or being condescending in any way to your tenants. And you can never discriminate based on race, color, religion, national origin, gender, disability, or familial status.
But being nice … well, you know the saying, “Nice guys finish last.” If you’re nice, you’ll let your tenant be late with rent, move in four cats and three pit bulls, and paint the living room purple. Let’s just say I didn’t allow purple paint. But the other stuff, well, let’s move on.
The best way to be with tenants, instead of being nice, is to be professional, confident, reliable, and fair.
Landlords should be professional, confident, reliable, and fair.
Some tenants will like you for this, and some won’t. But you can’t worry about that or let that matter if you want to be a profitable landlord. Educate yourself on landlord basics (here at Landlordology!), do what’s expected of you regarding repairs and maintenance in a timely manner, and expect your tenants to do what’s expected of them too.
4. Profitable Landlords Keep Their Emotions in Check, But Are Relatable
Landlords and tenants often develop a combative relationship. They both view the property as “theirs.”
The truth is that both sides have a point. You own the property, so it is yours, but once you collect rent, you just sold your right to have complete and unlimited access to that property.
Landlords who are too emotionally involved often feel as if they have the right to come over any time they like to check on the place because they own it. The reality is that you need to give your tenants their space and privacy. Let your tenants feel at home (as long as they adhere to the lease guidelines), and they will be more likely to be repeat tenants, which helps you become a profitable landlord.
When a repair issue arises, listen to your tenant’s concerns, and then try to act quickly. If you “feel their pain” and communicate openly with them, they will be more likely to relax and let you handle the issue.
- Tip: Leave Your Emotions at the Door
- 14 Emotional Roller Coasters You Might Experience as a Landlord
- Tenants’ Rights to Privacy
5. Profitable Landlords Are Very Organized
The more properties you manage, the more important it is to be organized. It helps to set up a system that’s easy for you to use to keep track of your paperwork and all the stuff that needs to be done.
Here’s a start:
- Keep a copy of each lease agreement.
- Make sure the rent is being paid on time.
- Pay the property taxes.
- Keep up with insurance.
- Have a schedule of when you will visit each property to conduct an inspection — the more proactive you are regarding routine maintenance, the more you can save in repair costs.
Related: Cozy can help you be a more organized landlord.