Becoming a Landlord
If you own a home, you may find that your current real estate investment property or resale property offers plenty of opportunity for profit. Ownership is the most common reason why people choose to buy real estate and the largest single investment to make is the purchase price. Owning a home can also yield income in the form of rent, which is a form of appreciation.
However, owning a real estate investment property often means learning to become a landlord, an individual who has the legal responsibility to maintain the property. By doing so, a person gains the benefits of increased income and possibly additional cash flow.
Property management is typically the responsibility of a landlord. Typically, this includes the following responsibilities: making repairs to the property, cleaning it, and keeping it up to code. Of course, a landlord also does not have the ability to live in the property, as they are generally required to keep it empty. In short, a landlord typically occupies a property and owns it through the legal right of the owners.
Landlord duties include being involved in the construction of the property, maintaining the exterior of the property, and operating it for rent. Essentially, landlord duties include all the usual tasks that a homeowner would do with regards to maintenance and upkeep. Once a property has been rented out, the lender will have to pay the owner of the property regularly. In this case, the lender will reimburse the owner for any expenses incurred.
There are two different types of property management services. The first type is leasehold management. In this service, the landlord holds the lease on the property; this is where the actual ownership of the property is transferred from the landowner to the landlord.
In leasehold management services, the tenant is actually the property owner. The landlord pays for utilities and repairs, while the tenant maintains the exterior of the property, handles the maintenance issues, and acts as the real estate investor.
The second type of property management is profit-sharing management. In this service, the landlord holds the lease and the tenant pay rent directly to the landlord on a monthly basis.
Generally, rental property is sold for capital appreciation in excess of the mortgage loan. A landlord may wish to capitalize on this type of cash flow as a profit-sharing investor. In this case, the landlord will receive cash on rent paid to them and is responsible for providing the tenant with all necessary utilities.