Most people get into real estate investing for the cash flow. They want to generate passive income that allows them to live a lifestyle that’s comfortable and relaxing. However, what most people don’t tell you is that landlording can be a high-stress job. And if you don’t have a plan for how to handle the stress you face, it could prove to be a nightmare.

The Main Causes of Landlord Stress

Landlording is not for everyone. Though it can certainly be rewarding (and very lucrative), there are numerous challenges. This includes:

• Late rent payments. Tenants don’t always pay their rent on time. And when a tenant doesn’t pay on time, it could negatively affect your ability to make mortgage payments. (You don’t need anyone to tell you what happens if you stop making mortgage payments.)

• Poor cash flow. In the real world, numbers don’t always work out as nicely as they do in a spreadsheet projection. Stuff happens and expenses can increase over time. And if cash flow gets tight, stress goes up.

• Pain-in-the-rear tenants. Some tenants are great. Other tenants are a total pain in the “you know what.” Between late payments and neglecting your property, these individuals can cause quite a few gray hairs to suddenly appear. 

Tips for Avoiding Stress

You’re always going to have some stress anytime there’s money on the line. However, there are plenty of ways to make your life as a landlord a whole lot easier. Here are several useful suggestions that we recommend putting into action:

• Improve Tenant Screening

The very first step is to improve your tenant screening. Because if you can get renters into your properties, most of your other problems are going to go away. Good renters don’t just pay on time; they take care of your property and tend to stick around longer. This leads to less turnover and more stability. 

The key to bringing in better tenants is to improve your tenant screening process. You can’t just accept the first application that comes across the desk. Even if it means waiting a few extra days, you have to implement a thorough screening process that consists of background checks, calling references, and verifying income statements. You can prevent a lot of unwanted situations by simply doing your homework upfront. 

• Hire a Property Manager

There’s no sense in trying to do everything on your own. While it’ll cost you a small percentage of your revenue, hiring a property manager to handle the day-to-day responsibilities will save you a considerable amount of stress.

A good property management service will handle almost everything on your behalf. This may include any or all of the following: property marketing, tenant screening, rent collection, scheduling maintenance, and accounting.

• Invest in Preventative Maintenance

Home systems break down over time – that’s just the way it is. Whether it’s siding, plumbing, electrical work, or appliances, you’re going to experience some deterioration. You can, however, plan ahead and invest in preventative maintenance. This will lead to fewer surprises and less costly repairs over the life of ownership. 

• Keep a Cash Cushion

As tempting as it is to take every dollar of the rent check you receive each month and put it into your own personal checking account, you need to be smart about how you manage your rental property finances. Keeping a cash cushion in a property-specific account is an absolute must.

Conservatively, you should keep somewhere between three to six months of expenses in this account. In other words, if your monthly expenses are $700, you should always have somewhere between $2,100 and $4,200 in cash. 

This gives you enough of a reserve account to pay for emergency expenses as they arise. If you want to be extra conservative, give yourself a year of cash. This will significantly reduce your stress and allow you to relax (even when major problems arise).

Embrace the Benefits of Landlording

Being a real estate investor and landlord comes with so many different perks and benefits. And if you do it well, it can be a semi-passive source of income. But in order to make it a rewarding endeavor, you have to account for some of the challenges.