Is it worth being a landlord?

For a long time, real estate has been a popular choice for investors — provided they can afford it. Recent trends like house flipping, “house hacking”, (living in one of the rooms and renting the rest) and short-term rentals have made it easier to invest in real estate, particularly for millennials looking for an additional income stream in uncertain economic times.

Although the potential for profit is appealing, landlording may not be right for you. You may have to pay significant upfront costs and time commitments, as well as legal liabilities and ethical dilemmas. This can impact your dividends. Here are three things you should consider before taking out a loan to purchase an investment property in an “up and coming” neighborhood.

What can you commit to

There are many options for managing rental property. You can be fully involved or hire someone to manage it. Consider your time and budget when weighing your options.

You might choose a fixer-upper if you have more time and money. These are easy to bring up to market with low-cost, do-it yourself projects. You might be able to buy a ready-to-rent property and hire a property manager to manage the day-today maintenance if you don’t have the money. However, with rising mortgage rates of up to almost 7 percent as of this writing and increasing property prices every year across the country, many people may not be able to invest in real estate.

Be prepared to weather any financial storm

While all investments have some risk, real estate is not one of them. Tenants who aren’t paying rent or vacancies can cause you to lose your investment and make it difficult to pay your mortgage.

Be sure to have enough money to make it through a downswing before you go crazy. A cash reserve or credit card can help you save money if your rental property is empty for a while or if your tenant becomes incapacitated and cannot pay rent.

Nancy Neiman says that if you require full occupancy and full rent to breakeven, without any flexibility, your mortgage isn’t sustainable. She rents an in-law suite in her garage to pay her mortgage after she refinanced the Claremont property.

This lack of flexibility is a reason why many real estate investors with large portfolios that are funded by loans end up putting themselves and their tenants in difficult circumstances. Your property could be at risk if you rely on future profits for loan payments.

Neiman, a professor of politics, said that “circumstances” can happen which are beyond your control. To ensure that those obstacles don’t make you vulnerable, you need to add a buffer to your business plan.

Understanding the tenant perspective

Renting properties is a very unique investment because you are actually interacting with people. You will get a better return on your investment if you treat them with respect.

Alonzo Johnson said, “Look at your tenant as partners.” He led a 2020 rent strike against Emerald Equity Group, the president of the tenant association for one of their properties in East Harlem. Johnson claims he still resides there. He says, “This is a symbiotic partnership; you provide housing and maintain a high standard of livingability, and we pay for it.”

Large, loan-financed real estate portfolios have in the past taken advantage of loopholes in housing regulations. This has contributed to the growing affordability crisis in major cities. However, tenants have more rights than ever. For example, the New York State’s Housing Stability and Tenant Protection Act of 2019, which tightens rules on evictions and rent rises among other things, it is not only ethical but also legally required to keep rent prices reasonable.

Even if your business is small, it’s important to know what rent you will need in order to make a profit. This will ensure that you don’t price out residents or affect housing access.

Neiman states, “Being ethical landlord means being flexible enough to people’s lives that you are okay with some rent forgiveness if necessary.” “If you aren’t mobile, you won’t be able absorb emergency costs. You will either be unethical or go under .”