Successfully managing a rental property is not for the faint of heart. The buck stops with you, and you do not have the option not to deal with problems as they come up.

Right now, interest rates are low, and many people are not eligible for mortgages, meaning that they have to rent. For many investors, this presents an irresistible opportunity. But unlike many investment opportunities, a rental property may include some responsibilities you are unprepared for. Here’s what you should know:

You Have To Be The Bad Guy

Deadbeat tenants are a reality of life as a landlord. Deadbeat tenants are easy to hate. But, what about that family who is otherwise great, but is often late with the rent check? You need the money to pay the mortgage. You might feel like an ogre, but this is a business relationship. If they can’t hold up their end of the deal, you have to get tough — and stay tough. Charge a late fee. Leave a three day notice. If there aren’t consequences for late payments, it won’t be a priority. But you might have to harden your heart in ways you won’t like in order to protect your assets.

You Have To Maintain a Cash Reserve

In an ideal world, you’d get a reliable tenant who maintains the property and always pays on time, and that tenant would live there happily and quietly for a decade. That’s usually the scenario first-time landlords envision. But in the real world, you probably won’t be that lucky. And every time a tenant leaves, it’s going to cost you time and money to clean and update the house to get it ready for new tenants. And nobody will be paying you rent during this time.

You Have To Spend Money To Make Money

Even after you’ve gotten the title for the house, you can’t just rent it to the first comer. You will probably have to update it. Then you will have to pay to advertise it. Then you will have to pay for background checks for prospective tenants. And don’t forget landlord’s insurance! You’re going to need a significant cash cushion, the equivalent of six months of rental receipts, in order not to feel the pinch right out of the gate.

If you’re still convinced that investing in a rental property makes sense, consider budgeting for a property management fee while you’re figuring out your overheads. You don’t have to hire a property management company like Real Property Management, but you may be glad for the option later.

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