Passive Income Ideas: Become A Landlord Ready For The Highs & Lows
What is passive income? Some people may not have heard of this term but it is something that everyone should familiarize themselves with. Passive income in a nutshell is the process of being able to make money while you're sleeping. That's right when you're getting those Zzzz's your bank account should be collecting those G's. With a normal job, in order to earn money, you have to work long 8+ hour shifts, 5 days a week to collect a paycheck. Sometimes that work can be backbreaking, time-consuming, or just something that you don't enjoy doing. One goal that all of us should strive to accomplish is finding a way to make additional income. One of those ways is to become a Landlord. With there being an influx of young entrepreneurs looking for ways to make money let's discuss what being a landlord means and some of the things that come along with it.
What Is A Landlord?
Becoming a landlord involves purchasing a residential property such as a home or duplex, getting the home in a livable and safe condition, and renting it out to a tenant for a monthly fee. Along with the title of being a landlord also comes a lot of responsibilities. You now have an investment to protect and you also are providing a service for people in your community looking for a place to live.
Pro's Of Being A Landlord
- Monthly income: When you are renting out a property to a tenant, each month you will be collecting a rental payment.
- Equitable Asset: The home or property you purchased hopefully has equity that will continue to grow over the many years that you own the property. Equity is the difference between what you owe on your mortgage and what your home is worth on the current market. For example, if you buy your first rental property in 2020 for $60K and the market value for that home is $100K you now have $40K of equity in that home minus any repairs you may have had to do in the beginning. If you were to sell that home you just put $40K in your pocket. You didn't have to work any overtime or weekend shifts. You just had to negotiate a great deal on that first buy.
- Can Be Passed Down To Your Kids: Not only will you see and reap the benefits of being a landlord you can also build up a portfolio that you can pass along to your children. I work hard now and started my own real estate investment business so one day I could pass it to my kids to run. A goal for every parent should be to make the path for your kids a little easier than you had it. You also want to teach them and instill what the benefits are of being an entrepreneur.
Ok, so we've gone over a couple of pros of being a landlord but now it's time to dive into the nitty-gritty a.k.a Cons of being a landlord.
- Tenants Not Being Able To Pay Rent At The End Of The Month: Unfortunately, if you are a landlord you are going to have tenants who may not be able to pay their rent every month. It sucks but it will probably happen. A good example would be the times we are currently facing now with the coronavirus epidemic. A lot of people and families have been affected and many have lost their jobs. Lost income means many won't be able to pay rent at the end of the month. When you purchased that property it probably came with a mortgage that you are still obligated to pay each month if the tenant pays or not.
- Maintenance Calls: Over time, things are going to break down and need to be replaced at your property. A clogged toilet, malfunctioning air conditioner, or broken faucet like the title picture is going to happen. As a landlord, you need to be prepared to receive those calls at 1 pm or 1 am. You also will need to have a plan or process in place to fix those issues when they arrive.
- Being A Landlord Wasn't What You Thought It Would Be: Sometimes when deciding to become a landlord you don't factor in all of the things that you will have to deal with. You will have to deal with tenants who may destroy your property, late or no monthly rental payments, evictions, late-night maintenance calls, taxes, and unexpected repairs that cost money. These things can become overwhelming to some people and you may realize that you don't want to deal with the russle and bussle of being a landlord. When this happens you have officially become a tired landlord and should start to look at options to get out of the market.
Well, there you have it. I hope this post helps everyone who may be looking for ideas on earning passive income. Becoming a landlord is definitely a great option to pursue just make sure you educate yourself on the good and bad of becoming one. Thanks to Chris Ivy.