Passive income is a term we hear about but might not truly understand. What is passive income? It’s the ability to generate a source of income where one is not directly involved. One example can be dividends from stock and bond investments, but a more common passive income is rental income.
Becoming a landlord and generating income might seem like a big task, but it can actually be done with a relatively simple process. In the steps that follow, I will discuss the easiest way to become a landlord. These steps are easy because I have done it, and it wasn’t very difficult.
Easiest Way to Become a Landlord (3 Steps)
The first step in becoming a landlord is to own a property, and thus purchasing one. Right after school, I moved to a brand new city I had never lived in before. I lived with an old friend for six months before I purchased my first home. Whenever you begin thinking about purchasing a residence, always make sure you know the area. For example, the home I purchased was near a local college and had many long-term residents as neighbors. To complete this step requires a little bit of research, an understanding of the area you reside, and the ability to make the purchase.
Live in the place you purchase. Many people get caught up in buying a rental property and renting it out immediately. While this may work for some people, it can be a stressful situation. You have to make sure the house is in livable condition, you have to market the place, then you have to meet potential tenants at the place throughout the week to show them the property. All of this adds up and makes finding a tenant a long and complicated process. By living in the place you purchase for say a year or two, you become comfortable with the property. You won’t have to travel to show it to potential tenants, you can create your own date the property will become available, and you give yourself time to find another living situation while you look to create income. I lived in my house for 18 months before I began renting it out. The best part was that it was right at the beginning of summer which meant… No yard work! If you catch yourself needing to do some work around the house and you’re on a budget, you can get great vouchers and discounts online to save on these expenses.
Find a good tenant and pronounce yourself “Landlord”. Although finding a good tenant isn’t always the easiest part, you can use your best judgement and various tools in order to ensure you are getting yourself into a good situation. I made all of my applicants run a credit report on themselves and provide me with the results. Bad credit can sometimes mean a bad tenant. I also required the tenant to provide an additional month’s rent to ensure payments were never behind.
While there might be many easy ways to become a landlord, for me the easiest way to become a landlord was through the process I outlined above. I have now been a landlord going on four years and having someone else pay my mortgage feels like quite the accomplishment.
Budget Smart, Invest Wise