Renting the first real estate unit

Real estate investing is regarded by many as a safe form of investment. You can generate income in real estate in many ways: by flipping (buying and reselling real estate assets) or by renting.

Real estate renting is regarded by many as one of the main sources of passive income. In this article, I will present some lessons that I’ve learned about renting the first apartment unit in the first year.

Without further ado let’s get started. Generating passive income through real estate renting at first view looks simple but there are some aspects that you need to be aware of before starting.
So, let’s get started:

Lessons learned from first real estate unit

1 Is considered a business

Despite is considered by many a form of passive income. Things are a bit more complicated than it seems. To understand this more we have to start to define what is a form of passive income. Passive income can be defined as a source of income earned with no or minimal labor. Renting a real estate unit in many cases implies dealing with your tenants.

I remember always having to deal with my tenant which can take up your free time.

If you consider starting a renting real estate business have this in mind that is a business that requires doing some work. Work will need even when you start with one unit, imagine if you have ten units it will require some work in case you don’t want to hire a person to oversee.

2 Carefully choose your tenants

The whole idea to start a renting business is to have quality tenants that provide you with constant cash flow. Quality tenants means tenants that can pay the rent and stay for an extended period as possible.

I remember that I have a tenant that stayed only two months because he couldn’t afford to pay rent. He explained that he lost his job. Your goal is to find tenants that can afford to pay the rent and stay for a long period, and more importantly, don’t forget an empty real estate unit it will be a liability for you.

3 Have always a reserve fund

As with other types of business, real estate renting businesses are required to have a reserve fund. Reserve funds will help your business to continue the activity. Imagine a situation in which you have a profitable business and forget to invest in the business. The value of the business will decline and this can be considered one of the reasons why some businesses fail.

I remember that I got text messages from one of my tenants saying that one of the appliances has broken. As a landlord, you need to have a reserve fund from where you can take money and fix or buy a new appliance. Like another type of business, real estate business not only takes out money from the business but also requires some expenses.

4 Register with Income Tax

The fourth important lesson is to register with Income tax. Being a form of income, you need to register and declare with Income Tax. The level of income tax differs from country to country. If you are doing abroad investments have to study the tax legislation of the country that you want to invest.

5 Tenants will try to negotiate the price

As I said at the beginning of this article to choose carefully potential tenants. One unpleasant situation that can happen is that tenant might try to negotiate the monthly rent.

That happened to me with one of the tenants. He tried to negotiate the monthly rent “and said that he left without a job and if is possible to reduce the monthly rent.

That happened to me with one of the tenants. He tried to negotiate the monthly rent “and said that he left without a job and if is possible to reduce the monthly rent.

6 Tenants delayed the date of the monthly payment

Another situation that can arise is that tenants sometimes will delay the monthly payment. Usually, the monthly payment is set for a certain day of the month. There is no ideal date to be set for payment. However, his ideal date is good to be set around the day when he gets the pay.

There are many reasons that a payment can be delayed if you are using bank transfers the payday might come on weekends when banks usually do not operate.

I remember another possible explanation is that was a problem with the bank transfer. Ideally, the payment date should correspond closely with the date when getting the payment.

These are some of the challenges that you have to be prepared for when you start a real estate renting business.  In conclusion, real estate renting is a good source of income if is done in the proper manner. In this article, I presented some of the challenges that I faced when I start to rent my first real estate unit.