12/29/2014 11:36 am ET Updated Feb 28, 2015

5 Clues to See if You Are Cut Out to Be a Landlord?

It's easy to get someone excited about investing in rental properties. After all, you get to bank monthly cash flow, enjoy some tax advantages, and you'll probably end up with appreciated value when you sell. With all of these good points, there is one facet of rental property management that can turn all of your joy into headaches if you aren't prepared. It's those pesky tenant relationships.

1. Legal Lookout

You won't necessarily experience many legal hassles if you're properly prepared. This means using state-legal forms for your rent applications and leases; blessed by an attorney is even better. If you're advertising your rental home or unit, you'll want to be careful to stay on the right side of fair housing law.

Even your interview should be carefully planned and scripted so as to avoid asking questions that can get you into trouble. It's unlikely that you'll be on the radar for a sting, but be aware that there are federal and local agencies sending in ringers to apply for rental units to check for violations. There are also people who are looking for a reason to sue, as it's usually going to be resolved with the landlord settling to avoid legal costs. Learn the law in your state and abide by it completely. If these kind of details are annoying to you, hire professional management or consider another investment strategy.

2. People Pains

Tenants are people, and they come in all shapes, sizes, and temperaments. If you're a landlord long enough, you'll experience many frustrations, from property damage to complaints about small things you can't control. They'll want to complain when they're not happy, not necessarily when you find it convenient. Late evening calls about plumbing issues are part of the business.

One really wise thing to do relates back to the legal issues. Have a very clearly worded lease with rules for behavior and deadlines for rent payment explained in detail. Have them initial those areas to be sure they've read them. One of the biggest reasons for landlord-tenant disputes is that there are misunderstandings about rules and payments.

3. Financial Foibles

Stuff happens and things change. You can't just do the due diligence when you first buy a property and get the first tenant then sit back and relax. Every time a lease is coming up for renewal you'll want to get a new market analysis to decide whether it's time to raise the rent or not. You may even have to consider cutting a deal to keep a good tenant, but you can't make the right decision if you don't know the current market and competition.

It's not just about the rent, as you really need to do regular big picture market research to know when you may need to think about selling. Neighborhoods change, employers move out, demographics change, and you need to stay on top of the market. Even if rents are holding in the short-term, you may want to sell if you anticipate future rent pressure or falling home values.

4. Maintenance Matters

Rental property ownership is a long-term deal, and houses need regular maintenance and repairs. If you let the home deteriorate, tenants will begin to give it little respect and the situation will worsen quickly. Holding a property for five, ten, or more years will require investment in major systems like heating and air conditioning. You should budget for this in your rents and set aside a cash account for these improvements. Surprise major repairs take the fun out of landlording.

5. Hiring Help

While it may not be financially feasible for an investor holding a single or couple of properties, professional management can work for you. In some cases you can use a professional management company for around 10 percent or less of rents collected. If you have the ability to add that into your rent in your market area, all of these landlord issues go away and you can play golf.

Rental property is one of the best investment strategies out there. Tax advantages, monthly cash flow, appreciating value, and inflation resistance all combine to make it very attractive. Just enter the game knowing what to expect or how to avoid what you don't like about landlording.