Is being a landlord the right career choice for you? In order for you to decide, you first need to understand what it really means to become a landlord, and what the advantages and disadvantages of becoming one are.
As a general rule, keep in mind that no matter what your assumption is, being a landlord does not mean that you will be earning money without having to sweat for it. At the same time though, you might that these responsibilities of a landlord are suitable for you and you might even enjoy them depending on your own personal characteristics and how you do the business.
What does being a landlord really mean?
The simplest definition of being a landlord is owning a rental property that you rent out to tenants through a rental agreement. This rental agreement typically serves the purpose of indicating an amount of money that the tenant will have to pay to the landlord, as well as preserving the tenants’ rights and the landlord’s rights. Additionally, a rental agreement must abide by the landlord-tenant law, which may differ depending on the location (the state and the city) where the rental property is located.
Being a landlord, however, has much more to it than that. While the idea of becoming a landlord might seem appealing to most people who believe that they can start earning a rental income through their rental property without having to put any effort towards managing the investment property, in reality, being a landlord means the assumption of a large array of responsibilities that are related to both the rental property that you’re investing in and the tenants who are renting that property.
Related: Becoming a Landlord: The Best and The Worst
There is a large set of advantages that come with becoming a landlord, and an equally large set of responsibilities that you would have to assume once you become a landlord. Every rental agreement that you sign with a tenant carries with it a responsibility that both you and your tenant would have to commit to, and you should always keep the tenants’ rights in mind, even if the tenant breaks the rental agreement and you have to result to eviction.
So, what are the advantages and disadvantages of being a landlord?
What are the advantages of being a landlord?
The advantages of being a landlord vary depending on the level of engagement that you’re willing to put towards your rental property, the distance between your area of residence and your rental property, the location of the property, the type of tenants that you’re trying to attract, and your personal characteristics as a landlord.
Related: Five Things You May Not Know About Becoming a Landlord
Basically, people who find it most advantageous to become a landlord are people who are willing and find it desirable to manage their rental property, tend to the tenants, maintain the landlord-tenant law, and preserve the tenants’ rights.
Being a landlord means investing a big chunk of your time tending to your investment property and your tenants, and making sure that your property is always in a good shape for a living and that your tenants are happy in their stay.
Additionally, being a landlord means that you’re the boss of your own, and you are in charge of everything related to your business as a landlord, including being aware of legal matters, such as always being up to date with the landlord-tenant law, as well as being capable of financially managing your real estate investment, knowing the right rent rate to set, and planning your finances to cover any unexpected expenses that might arise on your rental property.
If you’re looking to renting out a part of your own primary residence, then you should also be willing to interact with strangers (tenants) who will be sharing the living space with you, be friendly and welcoming, and make them feel comfortable enough to want to stay and leave positive reviews on their stay.
Related: 8 Steps to Becoming a Landlord
And, of course, one of the best advantages of being a landlord is the passive income. While it may not be as passive as most people expect, you will still be getting paid for virtually doing nothing but owning the place, and your tenants will be the ones paying your mortgage as well as most of the other expenses related to your real estate investment through their rent.
What are the hassles of being a landlord?
Being a landlord, however, also comes with a set of disadvantages, especially for people who make the career choice without actually knowing what to expect from it, or who expect to get paid at the end of each month without having to put any effort into managing and maintaining their own rental property.
Starting from the financial planning of your investment, in order to decide on an appropriate rent, a landlord must have sufficient knowledge of the expenses that may apply to their investment property, both startup costs and recurring costs, as well as do enough research to know the average rent rates of similar properties in the area.
Secondly, in the case of disagreement between a landlord and a tenant, such as a case of a tenant breaking the conditions of the rental agreement, a landlord must be willing to carry out an eviction process and file an eviction notice with the court. The eviction notice has certain rules related to it, which the landlord should be fully aware of, and the eviction process should abide by the landlord-tenant law and preserve the tenants’ rights.
Related: What You Need to Know About Eviction Laws in the US
In the case of the rental property becoming vacant, whether it is due to an eviction notice or due to the tenant simply moving out, the landlord would have to advertise the rental property in order to find new tenants; otherwise, he/she would start losing money on the investment.
While these are all responsibilities that a landlord would have to carry, there is a tool that is available to landlords which can take a heavy load off their back – professional property management companies. Professional property management companies can be hired by a landlord to assume some of the responsibilities that the landlord might not want to deal with. Some professional property management companies can even carry out all the tasks that are related to the rental property, from screening tenants, through writing a rental agreement, to managing the investment’s finances and even filing an eviction notice.
Of course, hiring rental property management companies comes at a price, and a landlord should be willing to pay an average of 10% of each month’s rent as a property management fee, which must be taken into consideration when planning out your finances.
Related: Becoming a Landlord: 5 Guidelines to Being Fair to Tenants
Bottom Line
There isn’t a perfect job in the world, and each career choice will result in unexpected responsibilities and tasks that might not appeal to all people. Being a landlord is no different; it comes with several advantages and as many responsibilities. So, before making your decision on becoming a landlord, make sure to head to Mashvisor’s blogs section and read a few blogs about the other aspects of being a landlord, from filing an eviction notice, through the responsibilities that are covered by rental property management companies, to the considerations of planning your rental property’s finances in order to find success in your real estate investments.