“The Pros And Cons Of Being A Landlord”
The idea of a problem-free income is the main reason people decide to own and manage rental properties. These may be apartments, guest houses, or duplexes, among others.
From most people’s perspective, being a property owner is simply sitting back and collecting rent payment each month and a few additional works.
Sadly, paychecks coming from rental properties aren’t easy to get. Though rental properties can generate a large income, it’s also important to know the pros and cons of being a landlord.
This is particularly important for those thinking of investing in rental property. Before you approach the world of property income, take time to think about the pros and cons of being a landlord.
That way, you can match your strengths and weaknesses appropriately with the pros and cons of being a landlord.
The Major Pros and Cons of Being a Landlord
One of the best ways to have a passive income is investing in a rental property and keeping reliable tenants.
If you’re planning to invest in a rental property, always remember the pros and cons of being a landlord that come with this property investment.
You may feel that investing in a rental property may seem simple enough, but it’s still important to examine the pros and cons of being a landlord.
Why? Because at the present time, being a landlord involves risk and difficulties.
Gone are those days when you could simply enter an agreement with a tenant, then allow them to move in and that’s it.
Nowadays, there are a great number of requirements for a landlord. There are duties that go with the perks of this particular job.
Hence, let’s discuss first the advantages of the pros and cons of being a landlord. This can give you a better idea of what to expect from setting up a rental business.
Advantages of Being a Landlord
Let’s begin with the advantages of being a landlord — of which there are many, in fact.
One of the major benefits of being a landlord, for example, is that you can structure the flow of your income without having to do a lot of work.
That’s especially true if you have a good tenant and you’re receiving your monthly income without fail.
In addition, you have freedom as a benefit of being a landlord. Even if you’re still liable for the maintenance of the properties that you’re renting out, you don’t have a full-time job.
Those are just some of the benefits of being a property owner. There are even more.
From the list of the pros and cons of being a landlord, here are 3 more major advantages of being a landlord.
1) Monthly Paychecks
The paycheck you earn monthly from a rental property is one of the rare cases in which you can collect a great deal of income for doing close to nothing.
Among the pros and cons of being a landlord advice, this is the most basic and primary advantage that’s included in the list.
When your property is in good condition and the tenant is responsible, you can get the rent payment to offset the cost of a mortgage as well as other expenses for keeping it up.
If the property mortgage is less than the rent payment, you can have an excess each month.
However, remember that you need to reserve money for repairs, house improvements, taxes, and unexpected vacancies.
Don’t forget to balance everything and carefully examine the pros and cons of being a landlord.
2) Equity as Property Investment
Owning and managing a property is somewhat risky. But there is an outstanding reward for those who take risks.
Two major things can happen. That is, the property may increase in value over time and the equity in the property may be covered by the amount of income you earn.
That’s one of the great advantages that are included in the pros and cons of being a landlord.
When these things happen, you can collect a considerable amount when you sell the property.
If you’re going to do that, don’t forget to reserve a portion for capital gains taxes, as well as an amount to cover fees related to selling the property.
3) Rent It out Before Selling
Renting out a property is a good alternative to selling if the market is currently declining. That’s one of the major advantages that you can see from the pros and cons of being a landlord.
For example, it’s certainly difficult for most buyers to find money during a bad market. There’s not enough demand to generate the value your property’s worth.
In that case, it is wise to rent it out until the market gets better. By renting it out before deciding to sell it, you can still get equity while getting off a bad market.
In addition, a big benefit of renting out a property in a second-rate market is that you can cancel some of the loss on the property when it’s time to sell.
Among the ideas in the pros and cons of being a landlord, selling a rental property is the most complicated one because of the tax implications associated with it, however, so consider that before deciding on a course of action.
Disadvantages of Being a Landlord
Now it’s time to see the other side of the coin.
Several people may think that being a landlord is a nice way to get passive income flow. That is, once you’ve spent some capital to fund your property, you can just relax and take the money.
However, that’s not always the case.
Unless you’re a property expert with lots of owned properties and a team to do the dirty jobs for you, being a landlord can sometimes be a headache aside from a drain on your wallet.
Here are the 3 major disadvantages that are included in the pros and cons of being a landlord list.
1) Tenants Can Be Terrible
Home renters have very few reasons to thoroughly care for a property. Most often, tenants will just leave the rental property dirty when they move out.
There are times that disrespectful tenants can ransack a rental property, thinking that their security deposit is worth it all.
In these cases, you may disburse a big amount of money to return the rental property to an appropriate condition for the next tenant.
Sometimes, tenants also just stop paying rent, thinking that they can get off from it for a while because of the high cost of getting them to court for an eviction.
These are risks you always have to take when entrusting others (tenants) with your property. It’s a disadvantage always worth mentioning among the pros and cons of being a landlord.
2) Rental Investment Requires Capital
Apart from the capital needed as an initial deposit to buy a property, funds are also required to manage your rental property.
For example, you need a huge amount of money to repair a rental property that is destroyed by a terrible tenant.
You may also need more money to take the tenant to court for eviction. That’s a serious downside of being a landlord.
These drawbacks can be a serious problem that can be avoided if a potential investor will take time to intensely study the pros and cons of being a landlord.
3) Possible Legal Issues
There are a lot of legal issues that can crop up for landlords.
For example, say you don’t make repairs to the property after you’ve been asked to by a tenant. Depending on your agreement, the tenant may then have legal options to withhold the rent, break the lease, or even send you to court.
That’s because they may have a case for your failure to uphold the terms of your agreement with them. Most rental agreements make the landlord responsible for certain points of property upkeep, after all.
Tenants can withhold rent or even vacate the property without punishment if you don’t perform your duties. That’s why you want to ensure you can live up to everything you promise in your lease or rental contract with them.
Additionally, if the lease is not airtight, you may have little recourse if the tenant causes damage to the property or does not pay rent. No business owner wants that!
Make sure that you have a real estate lawyer to review the lease specifics. That’s because legal difficulties often feature in the cons when listing the pros and cons of being a landlord.
Final Thoughts on the Pros and Cons of Being a Landlord
In planning for a rental investment property, don’t forget to study and scrutinize the pros and cons of being a landlord involving this property investment.
There are some benefits of being a landlord, like being able to set up the flow of your earnings and profits without putting too much effort into it.
Another advantage is you have a monthly paycheck. You can secure the rent payment to offset a mortgage cost and other expenses for maintaining the rental property.
You can also consider the equity as a property investment. Its value may increase over time while the equity may be covered by your earnings.
Furthermore, being a landlord lets you use the property in other ways to make money when you can’t sell it profitably yet.
While there are lots of pros in the list of pros and cons of being a landlord, there are disadvantages that should also be considered.
One of the major disadvantages is that rental property requires capital. Aside from the capital needed to set up a rental property, there’s also a huge budget required to manage it.
There are times when you’ll also have to deal with unruly tenants. That’s always a risk when renting out to people.
Sometimes, you may even have to deal with legal problems. This is especially likely if you didn’t have a specialist in rental law look over your contracts with tenants before renting out to them.
However, you can keep away from all these downsides if you will take serious time to know the pros and cons of being a landlord.
That’s it for the most important pros and cons of being a landlord! If you have any more questions about the pros and cons of being a landlord, just leave them in the comments below.
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