Rental business can be profitable but it can require a great deal of work
By Deborah Jeanne Sergeant
You have residential property (or could buy some). People need to rent houses and apartments. What could be a simpler way to make money?
While investing in real estate can represent a sound financial move, it’s vital to understand what it takes to be a landlord.
For one thing, it’s not a hands-off investment.
Faucet broke? It’s the job of the landlord to fix it. The fridge is not working? Call the landlord.
Trisha Isaman, senior director of housing programs at The Housing Council at PathStone, Inc. in Rochester, said would-be landlords also need to understand the market in the area where they hope to rent a property.
“Will you receive enough rent to cover your purchase?” she said. “Will you need to cover the mortgage?”
If the going rate for a rental like yours is less than what you need to cover the mortgage, taxes, repairs upkeep and occasional vacancy periods, then it’s not a sound investment.
“Plan for at least one month’s vacancy a year in your expenses so you can make sure you have funds available,” Isaman said.
Landlords are also responsible for getting properties up to code and seeking and dealing with tenants legally. Rental laws include federal, state and municipality laws. Saying, “I didn’t know” is no excuse.
Isaman said that getting organized from the start can help make recordkeeping easier, as landlords must keep track of expenses, records, leases and receipts.
“That’s very important at tax time,” she added.
Landlords should also form a plan as to how they’ll maintain their properties: hire a pro, contract with a property management company or do it themselves. Of course, DIY is the least expensive; however, it’s very time consuming and the landlord must have a wide array of skills. Hiring professionals as needed will cost more, but not as much as a property management company. That option takes care of most of the headaches, but also nabs a good share of the property’s income.
Isaman said renting out property is a big commitment.
“It takes a lot of management and oversight if you don’t have a property manager,” Isaman said. “There’s maintenance and emergencies in the middle of the night.”
Consulting with the local code enforcement office and building inspector about what it takes to get a certificate of occupancy can help landlords better understand the process. For example, stipulations include requirements on fire escapes, smoke detectors and fire extinguishers. The office should have a checklist available to help landlords get their property in compliance.
John Sherry, owner of JM Sherry Realty in Rochester, sells investment properties. He advises landlords to go with a property management firm if they own more than just a couple units.
“The laws of New York state have changed and not for the better for landlords,” he said. “Dealing with the different municipalities and their certificates of occupancy and the HUD housing stuff and their regulations: it’s becoming overwhelming for a person to manage a portfolio.”
Sherry said that careful screening of tenants can prevent many of a landlord’s headaches. Unfortunately, many new landlords are so eager to get their properties occupied that they go for the first person who can pay the rent.
“You’re better off having a vacancy for a while,” Sherry said. “You can’t get tenants out easily if things go wrong.”
For more information about home rental, visit www.landlordology.com/new-york-landlord-tenant-laws and https://ag.ny.gov/consumer-frauds/housing-issues.
Each month, The Housing Council at PathStone, Inc. in Rochester offers landlord classes on operating rental properties for $55 per person.