Owning a rental property in Philadelphia is an attractive idea. It’s a type of passive income that can generate a nice return on investment and eventually lead to ownership of multiple rental properties. Becoming a landlord also offers the opportunity to escape the 9-to-5 workday and work for oneself. And there’s the fact that people need a place to live which means that there will always be renters to fill the units. It’s a win-win situation, but you have to be prepared for what’s involved in being a landlord before you talk to a Philadelphia mortgage company about buying a multi-family property. Here’s a look at what you need to know about becoming a landlord.
Have the Building Inspected Thoroughly Prior to Purchase
You will need the building inspected as part of the mortgage process, but unless you’re buying a building in “as-is” condition, you need a practiced eye to seek out the signs of deferred maintenance and potential problems. Philadelphia is full of old buildings that suffer the effects of time and not everyone wants to put money into their properties. You might find that some major repairs are acceptable and you’re willing to deal with them. And sometimes a building has a multitude of issues that are costly to repair, but aren’t obvious. A thorough inspection will uncover problems and help you make the decision to buy or not.
Know the Laws and Tenant’s Rights
The city of Philadelphia has a robust set of ordinances that protect both landlord and tenant from adverse actions that either party may engage in. When you become a landlord, you have to abide by these ordinances or risk legal action by a tenant. They exist to prevent unscrupulous landlords from taking advantage of tenants and allowing properties to deteriorate. Learning the ordinances and understanding how they apply to both parties helps you be a good landlord with satisfied tenants.
Learn Basic Maintenance Skills
Think about your home and the small repairs it needs from wear and tear. Now multiply that among multiple units and you’ll find that there’s always something that needs fixing. You can hire a maintenance crew or service to be on-call and respond to maintenance requests, but you’ll save money when you can take care of simple repairs on your own.
Set Aside Funds for Miscellaneous Expenses
When you buy a building with the help of a Philadelphia mortgage company, you have the breakdown of the monthly cost of the mortgage and property taxes against the monthly income from the rent. And you may be aware of the incidental costs such as electricity for the hallways and heat for the building. Apportion money every month and put it aside for a rainy day fund. You’ll be able to handle an unexpected building repair without resorting to borrowing against the building.
Don’t Use a Boiler Plate Lease
A boiler plate lease, AKA a lease you download off the internet, print and sign with your tenants, does not provide adequate protection for you or your tenant. Connect with a lawyer that works on behalf of landlords and can provide you with a properly written lease. The lease needs to reflect Philadelphia’s ordinances and your own requirements for payment of rent and punitive actions you are legally allowed to take when a tenant fails to pay. Leases make for good relationships with your tenants and protects you when tenants are troublesome.
Decide if You Want to Self-Manage or Use a Management Company
One aspect of owning an apartment building is being on-call 24/7 to respond to problems tenants encounter. You have to be responsive and take care of their issues in a timely manner for their comfort and prevent the problem from getting worse. You might prefer to let a management company take care of things on your behalf and step in when necessary. A management company is set up to handle tenants needs and maintenance requests at any hour of the day. You get to sleep with the knowledge that someone else is taking care of the emergencies for you.