Becoming a landlord isn’t as easy as it sounds. One thing real estate investors can count on these days is a higher amount of scrutiny from loan officers. When it came time for getting financing, both the Pullens and the Robinsons say they experienced tougher examination from their banks and had to fill out more paperwork than in previous real estate transactions. In addition, the Pullens were asked to come up with an additional $9,600 just before closing to cover repairs. The Robinsons had to produce several years of tax returns. “Nowadays, mortgage underwriters are not taking any chances,” says Chris.
Clearly, the Pullens and the Robinsons were smart investors. But many people are not as savvy. Longtime real estate investor and professional coach Nancy Spivey says, “A lot of people don’t bother to write out a budget or make cash flow calculations.” Doing the math is especially important, says Spivey. She advises prospective landlords to be conscious of market rent price trends.
Sandra Pearsall, author and real estate investor (www.nomorerealestatesecrets.com), says that often new investors come to her and with no idea what their criteria is. “They haven’t determined if they want a two-bedroom, a three-bedroom, or if they plan to keep the property for a long time or not,” says Pearsall. As with any investment, setting specific goals is always the best first step.
THE TOP 10 PITFALLS ALL LANDLORDS FACE
Being a successful landlord isn’t as simple as finding good tenants and watching the rent checks come rolling in. It’s hard work. In his book Buy It, Rent It, Profit! (Simon & Schuster; $17), real estate expert Bryan Chavis cautions against the 10 most common mistakes landlords make. Chavis talked to Black Enterprise about each of these missteps:
1 Not continuing to educate yourself
“Laws change and they differ from state to state. It’s easy to put a tenant in an apartment, but you have to be educated and understand the rent variances and tenant regulations you’re expected to follow.”
2 Not following proper landlord systems
“Some of the most successful businesses are franchises. Why? It’s because branding, protocol, and operating systems are in place. You must follow proper accounting protocol.”
3 Not following Fair Housing laws as they apply to landlords
“Fair housing laws are one of the biggest things that are overlooked. It’s the most litigated area of housing aside from security deposit claims. There are seven protected classes—race, sex, color, national origin, familial status, religion, and persons with a disability. If you can’t remember these classes, you’re running a major risk. Bottom line: Don’t discriminate.”