Many people dream of becoming full-time landlords. It’s a great way to free yourself from the 9 to 5, and it can be a fun way to earn a living simultaneously.
However, many landlords still don’t know how many units they require to gain independence from their regular work.
As this article explains, units vary according to the required income. However, most property owners manage to replace their regular working income (after costs) at around 5 to 10 properties.
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When Do You Become A Full-Time Landlord?
Essentially, you become a full-time landlord when you have enough money coming in to support your household, don’t need to work, and still have some cash left over at the end of the month to buy new properties to expand your portfolio further.
Don’t stop your regular day job until your landlord business generates excess returns. That is, you have enough properties to continue growing your business.
Suppose you have two properties generating $600 per month after expenses and taxes. In most cases, this won’t be sufficient money to support you and your family, so you’ll need to keep working until you can generate more income streams.
Even if you have ten properties bringing in $3,000 monthly, that might not be enough to grow your business. You may need to continue working at your day job for several more years before you can switch to property management full-time.
What To Do If You’re Not A Full-Time Landlord Yet
If you’re not a full-time landlord yet but want to be one, you need a strategy. Even if you only have one or two properties right now, you should be able to make the transition permanently after around five years.
The trick is to automate as much of the process as possible. You want your landlord’s income to have minimal overheads for your time so you can focus on generating as much income as possible.
Lease Management
Quarem suggests that landlords invest in lease management. This way, you can reduce the work involved in managing your tenants.
Property Management Services
You might also want to consider full property management services. These services ensure that you don’t waste your time looking for tenants or collecting rent.
If you only have a few properties, keep working at your regular job. Live inexpensively and find ways to save for a deposit on your next unit. It won’t happen overnight, but what you can achieve in ten years as a landlord is surprising.
How To Become A Landlord
The best way to become a successful landlord is to specialize in buying properties in an up-and-coming area. This way, you can generate high yields and appreciation.
Yields are critical because they reflect the cash return on the capital you invest. Most landlords aim for 7 percent, though you can get significantly higher than this.
Appreciation is vital because it prevents you from falling into negative equity and increases the total value of your investments. Rising property prices mean your net worth grows, even if accessing the money takes a little effort.
To become successful, keep loan-to-value ratios as small as you can. You don’t want random void periods to make the property unsuccessful, meaning you lose it.
Remember, if nobody wants to rent, lower the price. Getting some money for a few months is better than nothing.
Avoid Low-End Areas
Try to avoid the temptation to start a rental business in ultra-low-end areas. These places tend to attract the least reliable tenants, and you may need help evicting them.
Also, don’t develop soft spots for tenants who can’t pay rent. If you are kind-hearted, always get someone else to collect rent on your behalf. Don’t let rentals slip. Otherwise, you will take significantly longer to create a business from your activities.
Know The Laws For Landlords
If you want to become a landlord, familiarizing yourself with local and federal laws is essential to avoid potential legal issues.
Acting as a landlord comes with certain obligations; understanding the details and regulations of landlords’ rights is key to providing safe, secure housing for your tenants.
Various laws dictate how landlords handle lease agreements, tenant screening processes, and evictions.
Furthermore, landlords are obligated to abide by fair housing laws, which protect against any form of discrimination among other protected classes in the US. Learning about landlords’ responsibilities and obligations can help landlords protect themselves from lawsuits.
Conclusion of Becoming A Landlord
To become a full-time landlord, you need between five and ten units. The actual number depends on the net profit each property generates and the level of income that makes you comfortable.
Think smartly about your business and adapt to changing circumstances. If you believe property prices will fall or that you might slip into negative equity, sell up as quickly as you can. Don’t wait for the market to determine your destiny. You’re asking for trouble if you do that.
Find great tenants in good locations, and incentivize the best to stay with you long-term. Prioritize professionals and people with secure government jobs.
