Pros and Cons of Being a Landlord : 3 Steps to Embracing or Escaping
Are you a tired landlord? Tired from the constant need to pull teeth when attempting to collect the monthly rent? Well you are not alone.
More and more people are entering the real estate space today thanks to popular shows such as “flip this house”. Shows like this will often glamorize the real estate business, but they skip the hard work and never share the real cost of doing business.
While flipping has been the focus of such shows, “landlording” has yet to gain Reality TV popularity. Nevertheless, new investors are entering the industry – many of which have zero experience in such a venture.
If you found yourself in the shoes of a landlord but didn’t anticipate the real cost of doing business (ongoing repairs, cost of bad tenants, screening, advertising, holding vacant property, etc…), don’t feel embarrassed. This is more common than you may think. Luckily, you can evaluate the situation and determine whether or not you want to continue. Let’s have a look at the pros and cons of being a landlord, so you can decide whether to embrace it, or escape it.
Are you able to afford the newly discovered costs?
You may have gone into this without understanding that things can break down (i.e the furnace or a/c unit). You won’t be able to put this issue on the back-burner, not that you’d want to. Tenants have rights, and one of those rights is to have working hardware for their utilities. Unexpected operating costs should be expected and accounted for as best they can be.
Are you financially capable of bearing this new expense?
Your answer to that question should tell you whether or not you can continue to be a landlord right now. A furnace may not sound like much, but there’s an old saying – “When it rains, it pours”. Things can easily snowball and get out of control. Ask yourself whether your current income can manage the emergencies that come up with not only your income property, but also in your personal life.
If you are able to bear this expense and stick it out, then good for you. You may very well be able to grow your business and gain new properties. Income property can be a great asset when you plan for it. The pros for this business are that you can replace your income using leverage, and escape the rat race. In order for you to do this though, it must be the right time.
Do you treat this as a business?
Being a landlord can be tough. If you are capable of empathy, then it can be really hard to stick to basic rules of the business of real estate when it comes to eviction. Some people have gone for years (literally years) allowing a tenant to stay in the home without paying a single cent. They simply could not kick out a person or family who had a sad story each and every month.
You need to understand that this is a business, and you must run it like one. You can allow a 3-5 day late rent period, and if that time passes, you need to send the proper notices. After another set time to catch up goes by and bears no fruit, an eviction must be filed. The situation of the tenant cannot determine your tasks.
Question yourself right now. If you fail to pay the mortgage, will the bank let it go? Never. Your home or income property will be foreclosed on, as well as any collateral you put up to get such funding. This is a business, and if you are simply unable to run it like one or you lose sleep doing so, then it is time to let go. Sell your income property right now, and spend your valuable life doing something you love instead.
If you find yourself with no issues in handling these issues, then congratulations – You may be landlord material! A real estate investment that is treated like a business can be a great wealth strategy. The hardest part would have been putting your feelings aside and focusing on the bigger picture. By pushing on with a set plan in place, this business can grow exponentially over time.
Is it worth the hassle of management?
If the profits are not adding up to an income that you can live with, then it may not be worth it to continuing management of the property. Aside from the unexpected costs, you need to be able to grow. If one vacancy can mean that you would be reset to break-even or in the negative, then things can go south quickly in an emergency. An emergency is just that – an unexpected event. If it were expected, then it wouldn’t be an emergency when you have the proper resources in place to fix the problem.
Many new landlords get in the business with single family homes. These SFR income properties are not capable of sustaining a vacancy. Even 2-unit properties or higher can be risky depending on the expense versus profit ratio.
In some cases, a person may not have planned to be a landlord. They may have landed in the probate process and inherited a house. Maybe they decided to try and earn an income from the home instead of selling the house for cash. Everyone in this situation quickly learns what it means to be a landlord, and decides if it’s something they wish to continue.
Property management must still be done even if you are on the other side of the country. Many out of state owners find themselves in a predicament of having issues getting accurate quotes for repairs, or having to evict someone if they do not have a local property manager in place.
If you find yourself past these issues, then you have reached a level of success with real estate investing and will likely grow. A growing REI company leverages the management tasks of others while focusing on securing additional properties. This is a major pro versus con. Good property managers can be hard to find, but worth having. They will file timely evictions, ensure checks are deposited into your account, and handle the contractors as issues arise.
How to sell an income property
Are you dreading holding onto a property, or dealing with a vacant house? Then sell it to National Cash Offer by calling (877)-990-7774. We will give you a fast cash offer for your rental property.