Before deciding to rent out your home, you should be aware that there are risks associated with being a landlord.
We want to be up front about these risks so that you have realistic expectations. Some homeowners, after speaking with us, decide that being a landlord is not the best option for them.
It is better to know this before you enter into a Landlord/Tenant relationship instead of after. To help you with that decision, we've detailed some of the risks involved.
Risks To Think About If You're Considering Becoming a Landlord
Paying Rental Property Rent on Time
Some tenants will not pay the rent on time or at all. We are very careful with our tenant qualification process, but the truth is that some people will trick us. We are on top of these situations. As soon as the tenant is late, we call and we call again until we get cooperation. If we don't get cooperation, we will file for eviction.
Setting these strict expecations alleviates problems down the road, similar to managing a teenager's curfew and setting strict expectations early on. If we don't lay down ground rules early in the relationship, then there's a greater chance of being taken advantage of again and again.
However, we strongly advise that homeowners continue to pay their mortgage on time to save their credit score. So, even in the event of a late rent payment, you should be prepared to have a financial cushion to pay your mortgage.
Damage to the Rental Property Home
Yes, there will be wear and tear to your property. Tenants do not care for a rental home the way a homeowner does. However, unless it is "beyond normal wear and tear," we cannot charge the tenant. So be prepared to touch up paint and patch/replace carpet.
We document the home prior to the tenant moving in and we document the home after they move out. By comparing move in to move out, we can see whether the tenant has done any damage that they will be held responsible for.
Rental Property Profitability
You will not always be profitable as a Landlord. As with stock investments, renting out an investment home and being a Landlord is a long term investment. You may not turn a profit day to day but you should come out ahead in the long term if you watch it day to day. Some months/years will have more repairs, more problem tenants and more difficulties.
However, by taking a long term view, maintaining your home as much as possible, hiring a quality property management company and getting excellent tax advice, being a Landlord is an excellent investment opportunity.
Give us a call, let us help so you know ahead of time what risks are involved with being a landlord and how best to manage those risks.
