Are You Cut Out to be a Landlord?

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One of the ways that many people decide to invest in real estate, or create a passive income stream, is to purchase a rental property with the intention of becoming a landlord.

Owning property that you can rent out to others can be one way of creating income, and also of waiting for a property to increase in value.

However, being a landlord isn’t for everyone.

You should consider whether or not you are truly cut out to be a landlord.

Renting Out Property Comes with Hassles

I know I’m not cut out to be a landlord.

Just the thought of the hassles that come with renting out property have me steering clear.  If I had to move, I would rather sell my home at a loss than rent it out while waiting for the housing market to recover.

But that’s just me.

Here are some of the issues that I would have with being a landlord:

  • Trying to collect rent: I wouldn’t want to try to collect rent, especially if I lived in a different town.  It becomes especially difficult if you have a tenant that gives you trouble about paying.
  • Maintenance and repairs: Being responsible for general maintenance and repairs also doesn’t appeal to me.  While some people enjoy doing the work, I don’t.  And, on top of that, I don’t want to deal with the hassle of hiring someone else to do the work.  Then I’d have to pay them out of the rental income.
  • Cleaning it up after tenants leave: Another issue is cleaning up after tenants leave.  What if they break something, or had pets?  Once again, you can hire someone to take care of those things, but it comes out of your rental income.

In the end, I have seen too many instances of people I know trying their hands at being landlords — and running into no end of trouble.

Before you jump in and become a landlord, make sure you think through the hassles that might be a part of your duties of being a landlord.

Protecting Yourself as a Landlord

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Are you truly cut out to be a landlord?

There are some things you can do, though, to protect yourself as a landlord.

One of the most important things you can do is to check into the backgrounds of potential tenants.  Look at credit scores to determine whether or not you might have trouble collecting payment.  Ask for previous landlord information so that you can call to find out what types of problems, if any, you might run into by working with specific tenants.

You can also hire managers to oversee your rental property.

While it will cut into your profits, a competent manager can take care of items in your absence — especially if you live in a different state from your rental property.

If you don’t like the hassle of dealing with tenants, but you feel you can make a good income with real estate, hiring a manager might the way to go.  You can still build an income stream, and avoid some of the hassle.

Just make sure you are careful about who you hire.

Bottom Line

For some people, rentals are a great way to build a revenue stream.  However, for others, being a landlord isn’t the right path.

Make sure you consider the pros and cons of being a landlord before making the decision.

Published or updated October 26, 2012.

Comments

  1. Track Your Bucks says:

    Very seldom does the “make money in real estate” crowd talk about the negatives of landlording. So here it is. In my three years of experience in dealing with a rental property, I dealt with:

    * Break-ins
    * Tenants who forced me to hire an eviction attorney…
    * …after not paying rent for over three months
    * An earthquake (seriously)
    * Constant repairs and maintenance

    I wouldn’t wish my experiences on my worst enemies. I’m all for investing in peer-to-peer lending or the stock market – similar returns (check the history) and MUCH less work. If you decide to invest in real estate, go into it with both eyes wide open; yes, some folks are successful in the arena, but there is plenty of work involved, and it’s not for everyone.

  2. Hunter @ Financially Consumed says:

    We’ll be moving next June and will be renting our house whether we like it or not thanks to a lousy housing market and a wide margin of negative equity. We hope to bypass some of the stress by hiring a professional property manager to deal with screening tenants, collecting rent, maintenance issues, and eviction if required. I’m happy to pay a few bucks for someone else to do all this.

  3. We have a property manager and I’m very pleased with them. I think my tenants are pretty good but having the property manager sure takes my mind off things.

  4. Jenna, Adaptu Community Manager says:

    I just became a landlord and so far it’s been pretty smooth sailing. I think that is because we have great tenants so it makes dealing with issues a breeze.

  5. The biggest problems happen when someone thinks of being a landlord as easy money. It isn’t. It’s at least a serious part time job.

    When I teach landlord training classes, I find the more businesslike landlords have the best experiences.

    Good point to know yourself before assuming it’s a good fit for you.

  6. I am a distant landlord. I must say having a competent property manager is key to keeping your sanity. If I owned my property locally I would still get a property manager. The savings outweighs the cost.

  7. The responsibilities it takes to be a landlord is what really turns people away of becoming one. But hiring the right person can take a huge burden off your shoulders. With a good tenant, it would all come together and really the only thing you would have to make sure of is if your manager is doing his job and is the tenant paying? I’m a big fan of renting properties because you must treat it just as you would with a business.

  8. Thanks for the post!
    How does a new landlord go about checking potential renters’ credit scores?

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