Pros and Cons of Being a Landlord
Being a landlord does have its perks, but sometimes it’s not all it is cracked up to be. Before becoming a landlord, you should check out a pros and cons list before taking the leap and buying rental property so you can determine if real estate is the right path for you.
- Extra Income
Rental income is the best benefit of owning rental properties. You should crunch the numbers so in the future the rental income exceeds the property’s holding expenses such as property taxes, insurance, repairs, and maintenance. Then you, the landlord, will get a check each month as a consistent source of income. If you want the chance to get extra income, you can look up properties in your area to buy as Indianapolis Houses for Sale in your free time.
- Tax Deductions
Another financial benefit of owning a rental property is the tax benefits that come with it. You can get business deductions, the cost of property which includes insurance, taxes and maintenance, deprecation, and mortgage interest. Most of these benefits are only available to rental real estate investors.
- Equity and Appreciation of Property
Some property can appreciate value over time. Depending on where the rental is or what land is owned, there is a real chance you can benefit from future appreciation of the property. Appreciation can depend on if a city has experienced job growth and a population increase which will add to the city’s well-being.
Income from a rental is considered passive, but being the landlord of a rental property is very hands-on and a lot of work goes into owning a rental property. Responsibilities can include advertising vacancies, showing the property, screening tenants, collecting deposits and executing the lease, collecting the rent, even securing construction leads or communicating with tenants and coordinating maintenance are just a few.
Sometimes landlords must outsource their work if managing more than one property.
- Risk and Liability
Renting a property to a tenant opens up the possibility of risks and liability if your property is not properly kept up both to code and appearance. If a tenant gets injured on the property due to your negligence, you are open to litigation. You may also find that you have to pursue damages against a tenant because they trashed the property or have ignored eviction warnings. As a landlord, you must stay up-to-date on federal, state, and local rental laws and make sure you have coverage to protect yourself.
Rental properties must be maintained and repairs must be done over time. Tenants may cause damage and there is always just general wear-and-tear on the property where items will need to be replaced, repaired, or updated. Examples of unexpected expenses are a busted pipe, a damaged roof, an A/C or furnace breaking, or even finding out the tenant did trash the property. You must make sure you set aside a portion of the rental income for these ongoing repairs and maintenance.
These are just some pros and cons of being a landlord. You can make your own list if this is something you are deciding with some of these or other ones such as being your own boss or the possibility of having a vacant property for too long.