Like with most things in life, there is an upside and a downside to owning rental properties, and the list of both advantages and disadvantages is quite long. We’d like to take a moment to skim through some factors that may not be on your radar when considering the purchase of a rental property.
Managing a rental property from a distance without a property manager can be incredibly difficult. Some landlords choose to hire friends or family to take over this management role, making them their employee, which can bring up an entirely new set of problems… of the personal variety.
What about when new tenants are needed? Do you have the time, the energy, and resources to make this process cost effective? Remember, an empty rental property is a property that is losing you money, and the longer your spot sits vacant, the more it is costing you. You need to fill your rentals quickly, and your personal schedule can suffer while you’re trying to make this happen.
Hopefully you find perfect tenants who pay their rent on time each and every month, hassle free. But what if they don’t? When rent collection time rolls around (12 times per year!) are you ready to go out and collect if the check never comes?
Plumbing. Electric. HVAC. These can be big ticket items! Then there are the medium-sized recurring projects like cleaning, painting, and landscaping that you just can’t ignore if you want to keep your rental properties filled. And what about the little things? Broken garage doors, stuck windows, faulty ceiling fans, noisy heaters…the list goes on and on…and someone has to fix these things (that’s you!).
If you add in some real doozies like appliance upgrades, or roof repair, that rental property could end up siphoning money out of your pockets for years to come.
With resources such as Craigslist and Zillow finding prospective tenants is not as difficult as it was years ago. But keep in mind – you get what you pay for! Running an ad in a reputable publication can yield higher-quality clients, like a responsible older couple vs. a rowdy group of college students.
Always take the extra time to run a credit check and background check on your prospective tenants. This can end up saving you a premature, time-consuming (and expensive) eviction process.
When interest rates fall, buying a home can be more cost effective than renting. Rental property owners have been known to lower the rent to stay competitive in a changing market, and this can really inhibit your ability to make a return on your investment!