Most people imagine that being a landlord is a road to riches that requires little-to-no work…that is until buy or inherit their first property property and make the decision to rent out. The fact of the matter is that most landlords end up losing money on such endeavors. It’s undeniably, not for everyone
Being aware of what a landlord’s work entails will help you decide whether such an investment is worthwhile.
Consider the following:
Every time a tenant moves out, you’ll have to fix everything up
This is called “turnover” in the real estate industry. It is comprised of sanitizing the home and having it repainted. At times, the tub may need to be re-glazed, or the carpet will warrant replacement. This is just for minor repairs. But… if a tenant has wreaked havoc on the unit, the expenses would be much more expensive.
On average, this will need to be done annually. At times, you’ll have a tenant that remains in the unit for years and only ask for minor touch-ups or carpet cleaning upon lease renewal. Other tenants will break the lease, resulting in more turnover work for you every 4 to 6 months.
When the home is vacant, be ready cover the home’s expenses
Locating quality tenants is the most troublesome task landlords go through. Sure, there will be plenty of responses to an ad you place, but they won’t all come from dependable, stable, and tenant-worthy people with full-time jobs and clean criminal record.
It’s not uncommon for a unit to remain vacant for up to 3 months. When this occurs, you’ll need to pay for costs normally covered by a tenant.
When tenants don’t pay you, be ready to do so for them
Costs must be covered by someone if the tenant doesn’t pay them. You might even need to cover legal costs just to have bad tenants removed from the premises. The home won’t earn any revenue while your tenants squat there. You might hear heartbreaking stories about how your tenants aren’t able to pay you and aren’t able to leave either. CBS News once said that those who have a sympathetic ear should refrain from becoming a landlord.
Your tenants might outright crazy
Thoroughly validate everything that the tenant claims on the rental application. It’s common to rent out a unit to a deceitful person who trashes the house, moves in 2 0 relatives, builds a meth lab or pours concrete down the drains (yes this has actually happened) . Whatever damages they cause, you’re the one who will have to pay for it.
If you’re not familiar with landlord-tenant law, you might be setting yourself up for trouble
When it comes to landlord-tenant laws, things can get tricky. As a landlord, you’re responsible for offering your tenants a safe place to live in. Every state has a different definition of “safe,” though. You’ll need to adhere to state laws with regards to conducting inspections and sending legal notices, among other issues.
You could face a lawsuit if you fail to follow legal requirements. You also might be unable to get your tenants out of the unit. As such, it’s best to have a real estate lawyer on retainer.
Oh yea…you’re going to need an accountant
Tax laws that regulate rent collection and property ownership are complicated. You’ll want to capitalize on each deduction, so your profits remain in your bank account and not the government’s.
This is a long-term strategy
When landlords try to pay off mortgages with tenants, they barely break even for the most part. Landlords who successfully generate income from property rentals have owned their homes for over three decades. Cushions are kept in place throughout the entire period. At some point, a consistent revenue stream comes in to fund their retirement. Most of these landlords become dedicated to the business and purchase several properties.
However, if you haven’t planned for long-term objectives, you could lose money by bringing in a few bad tenants.
There is another option
If you’re unsure about becoming a landlord, try selling a property you don’t live in. We can purchase your property as-is with cash and offer you a hassle-free process. For more information, contact us today. We will be pleased to answer all your questions.