I never thought that one day I would become a landlord.
Until recently, I had no interest in real estate. I got into investing just a few years ago, and have since acquired multiple properties. All of which are long-term rentals.
I like long-term rentals because of the reliable income streams that come in every month. Dealing with short-term rentals, or AirBnB for example, means I have to be a lot more hands on. Being a landlord can be enough work in and of itself. Short-term rentals, however, can be much more profitable than long-term rentals.
I wrote an article about how to be a great landlord, and another article about how to find good tenants. I noted that the most important thing to me in making sure that I will have good tenants is to take great care in choosing your tenants, screening them, interviewing them, as well as running background checks on them, no matter how nice they appear at first.
I’ve had the nicest people apply to live in my properties, people that I was almost sure I could trust, only to find that their background checks came back with drug trafficking charges or multiple evictions. This was the case for one couple and their three children.
Trust but verify, is my motto in this business.
Being a great landlord means screening your tenants and not rushing to throw anyone in the property in order to collect rents faster. Like preventative maintenance on a property will prevent major issues down the road, so will taking the time to carefully screen your potential tenants will avoid larger problems in your rentals.
So on to the pro’s and con’s of being a landlord:
It’s work, that’s for sure. People in this industry love to mention the landlords that sit on beaches on the other side of the world without a worry about their properties. “This can be you!” alongside a photo of someone sitting in a beach chair drinking a margarita. Now this is true to a degree, in the case of hiring property management for your properties. However, you still need to manage the property manager.
And some property managers require more management than others. Some require no management at all, depending on how well you know them and trust them to properly manage your property. While others will respond that everything is going well, only for you to later find out that things were in fact not going well at all, maintenance requests were over charged and someone who wasn’t supposed to be was pocketing the money that you paid towards “fixing” your rental.
Some landlords get calls in the middle of the night. Usually tenants who are complaining of something breaking. A toilet clog, a leak, a dead bulb, and you have to drive however far your rental property is in order to fix it. Or you get a call from a neighbor complaining about noise, or you get a call from the police, informing you of worse.
I know of landlords who have had tenants murdered in their rentals.
But I’m not here to scare you. The truth of the matter is, even though bad things do happen, with great care and consideration, you can minimize these risks. You can be a good landlord, and have things go very well for you. You can also have good tenants who take care of the property like it is their own. Some people are just like that. Pride of ownership is a real thing with single family homes.
Here are the pros of being a landlord:
- Steady income
- Someone else pays your mortgage
- Pride (in some cases)
- Increase in rental income over time
- Appreciation of the property
- Tax incentives and write-offs
- Other benefits of owning real estate (i.e. leverage).
Being a landlord means that you are also a real estate investor. Being a real estate investor means that you benefit from ownership of real estate, such as the above mentioned appreciation of the property as well as depreciation of the structure as a form of a write-off on your tax returns. Not to mention that the IRS taxes rental income differently from, say, W2 income. There are many incentives for a landlord.
For me, pride is knowing that I am providing people with a decent place to live, while working to meet any needs they may have while living there.
The cons of being a landlord:
- Potentially awful tenants
- Mortgage payments (if you’ve done this right, your mortgage is less than what you’re making in rent)
- Potential for loss (market downturns, catastrophic events, etc.)
- Potential for lawsuits
- Recurring maintenance
- Time consuming (Depending on how well you’re organized)
- Cost to make the process passive (paying a property manager)
It goes without saying that there are pro’s and con’s for everything, and that not everything is for everyone. Not everyone wants to be called at odd hours of the night to fix leaking fixtures or clogged toilets.
Your experience will come down to your tenants. Some tenants complain about every little thing, and others just deal with it themselves. I’ve had tenants that have changed faucets for me because it was easy for them to do, without ever having called me.
This is why the interview process for prospective tenants is so important—you get to see just who the person really is and what kind of tenant they will be. The cons can be mitigated while still maintaining all of the pros in any arrangement. The first step is figuring out how, and then executing on that knowledge to make the process as seamless and as passive as you can possibly make it.
Let me know in the comments below what your experiences have been, both good and bad, since you’ve been a landlord. If you’re thinking about becoming a landlord and are unsure if it’s for you, comment your concerns below!
