When you think about becoming a landlord, you have this image in your head of you laying back and watching income flow right in. You’re not completely wrong, but the image is slightly distorted. Read through this blog to accurately understand the best and worst about becoming a landlord.
The Best About Becoming A Landlord
A Long Term Investment
What’s great about real estate investing is that it is a safe long term investment. Investing in real estate by becoming a landlord allows you to build up equity against your property, gain on appreciation, and build wealth. Additionally, you can invest in multiple properties and enjoy the leverage that real estate offers, and increase your overall net income and net wealth. Another advantage of real estate as a long term investment is the fact that it acts as a hedge against inflation. As property prices increase, as a landlord, you may increase the rent you are asking of your tenants to match inflation forces.
An (almost) Passive Income
Cash flow usually a real estate investor’s top priority. Becoming a landlord means that you will be able to (hopefully) achieve positive cash flows on your income property. If you still haven’t found your property, make sure to use Mashvisor’s analytical tools to search for and find a positive cash flow property. What’s also great about becoming a landlord is the fact that you can invest for cash flow in the short run, appreciation in the long run, or both. The passive income also allows you to save for retirement or even retire early. As you can read in this point, and the aforementioned, becoming a landlord allows you to generate a passive income.
BUT, we have something to highlight. Because we usually refer to rental properties as ‘passive cash producing investments’, investors usually assume that passive means zero work has to be done. This is never the case unless you hire property management to take care of all of the work required. Eventually, you’ll sit back and watch money roll in, but not without some work on your end first.
Related: How to Make Money in Real Estate Passively
Airbnb
Being a landlord for an Airbnb property can be a genuinely fun experience. You will meet people from different corners of the world, be their tourist guide for the day, and be part of an international experience, all under your roof while making an extra buck. Who wouldn’t want that?
The Worst Part About Becoming a Landlord
Bad/Problematic Tenants
Bad tenants are probably the worst part of becoming a landlord. The whole process starts with screening and choosing tenants. If done correctly, you shouldn’t be facing any troubles. If for some reason you’ve chosen problematic tenants, you’re practically done for! Nothing troubles a landlord more than tenants who do not pay their rent on time, tenants who trash the apartment, tenants who always seem to have something to complain about, tenants who break things not even their deposit can cover, in sum – tenants who cost more than they make you.
And don’t get us started on evictions. The fact of the matter is that they are more than just an eviction notice taped to the door. You may find yourself at battle in court, and maybe even losing. This is why you need to carefully screen, vet, and select your tenants from the beginning. And if you don’t, you can learn how to deal with bad tenants, but they’ll always remain of one of the challenges of becoming a landlord.
Related: How to Deal with Bad Income Property Tenants
Repairs and Renovations
As much as you may hate it, repairs and renovations are part of your responsibility as a landlord. And this will require significant work, upkeep, and cash support. And contrary to what many investors think, renovations are in fact a very important factor whether you’re selling to renting your property. Renovation projects and upkeep considerably affect the value of your property, and its appeal.
Renovations do not necessarily have to be in the ‘worst’ list of becoming a landlord, but if your previous tenants have caused serious damage to the property, it can be your worst nightmare. Not to mention the repairs you have to do while the tenants still occupy the property, specifically 3 AM plumbing problems. But fear not, there are plenty of tips and tricks out there to renovate economically, creatively, and without much effort.
Risk
No investment comes without bearing risk. And while today’s US housing market is stable, some investors are foreshadowing a downturn in the near future. So while real estate investing is less risky than say, stocks, it still bears its own risks.
Related: 5 Risks That Come With a Rental Property and How to Mitigate Them
Airbnb, again
Being an Airbnb landlord is very similar to being a landlord of a traditionally rented property. The only difference, and a disadvantage of Airbnb over traditional is the frequency of turnover. As discussed above, maintaining the property between tenants is very important. And it makes a significant difference when you’re tending to the property three or more times a week (often having to clean up party scenes) than once every few months, or even years in the case of traditional rent.
Related: Four Things to Consider Before Purchasing an Airbnb Investment Property
Final Thoughts
Overall, you can see that becoming a landlord comes with a challenging job description. And in the end, do not let out ‘worst’ section of this blog discourage you from becoming a landlord. Just make sure you understand the challenges that come with becoming a landlord, and learn how to overcome those because in the end investing in a rental property can be a rewarding experience.