It would sound ungrateful to say that owning a second real estate property can be a load, but people get accustomed to good things very quickly. If you have recently become an owner of a second house you must be very excited, and you should be.
However, soon enough you will start asking questions like “What should I do with it? Should I sell it? Or should I become a landlord?” People usually think that being a landlord is just collecting money every month and going on with your life, but if you have had any experience with rental property, you know it takes a lot more.
If you’ve never owned a rental property, you should educate yourself on the matter before taking any actions. We have listed some pros and cons that we feel could help you with making such a decision.
Pros of Being a Landlord
This is, of course, the most obvious reason to become a landlord. As long as you’re the owner of a property and are ready to invest a certain amount of time, work, and money, you can profit from it. If you find a responsible tenant, the contract between you two will guarantee an agreed monthly income for a certain period of time.
If you want to secure your kids’ future or keep options open for yourself, rental property can be a great choice. You can’t know if you will be able to help your kids solve their housing issues in 10 or 20 years. However, if you’re already in possession of a second property, renting it might be the safest way to plan your and your family’s future.
Good Retirement Plan
Even if you have decent retirement income, it can never be as high as it used to be when you were working. That’s why many people plan their retirement carefully, and unfortunately, a lot of them are forced to work an extra job in their senior years to maintain a decent living standard.
If you’re retired or near retirement and you have a second property, turning it into a rental can make a good and stable source of extra income. That way you won’t have to spend your golden years working.
If you’re planning on selling at some point and you think your property area will boom in the future, then renting your property until that point would make a good investment. That way you would make a double profit – the one from the years of renting, and the other one from selling at a high point.
Cons of Being a Landlord
Unfortunately, there are no tax breaks for landlords whose property is under a mortgage, which makes it harder to repay the investment and get out of the mortgage. However, there are certain tax reliefs for repairs, legal fees, travel costs, etc.
As a landlord, you are obligated to maintain the property at a certain standard, which takes a lot of time, work, and money. Even if it’s a small repair that a tenant can make in a matter of minutes, they will still expect you to come and take care of it.
When a tenant leaves the property, you will have to bring it to the prior state and meet all the requirements for renting out real estate. These costs are usually pretty hefty.
Emergencies make some of the most stressful aspects of being a landlord. A pipe can burst in the middle of the night, and you will have to get on it immediately because it’s your responsibility and you want to reduce the potential damage. You can hire an agency to be alert in case of such events, but that, of course, means more costs.
There’s a lot of liability risk involved in renting a property. You always have to be up to date with the most recent standards, and yet you can still get sued over something. That goes the other way too, sometimes you can be forced to sue your tenant to solve an issue, even though a legal dispute is the last thing you want to take part in.
Contrary to popular beliefs, being a landlord can be very time-consuming. The tenant should feel free to call you at any time, especially if there’s an emergency, which means you should always be alert.
You would also have to spend a lot of time undertaking maintenance, dealing with the complaints, potential legal issues, doing the taxes, etc. You can also hire an agency to deal with all this, but that means a lot of financial cuts that can make your investment pointless.
A lot of people feel that it’s immoral to be a landlord. Some of them are loud about it, some are not, but almost everyone recognizes problematic power dynamics in landlord-tenant relations.
Of course, morality is a relative concept and it’s easy to rationalize this problem. If you don’t become a landlord and decide to sell, someone else will do it, so why shouldn’t it be you? Maybe you have spent some time living as a tenant, so it’s your turn to be a landlord now. You can look at it as the circle of life. After all, it’s all legal.
However, at one point you might find yourself in a position where you have to evict a family with small kids. That’s probably the last thing you want to do, but sometimes it’s the only rational choice you’re left with. Otherwise, you have just bought a house for strangers to live in for free.
If you don’t think you have the stomach to handle such situations and live carefree, then becoming a landlord is probably not for you.
As we all have learned by now, there is no such thing as free money. That also stands for property rental. Being a landlord takes a lot of time, work, nerves, and money. If you’re thinking about doing this for easy money, you should probably skip it.
However, if you’re familiar with all the upsides and downsides of being a landlord, and you know exactly what you want to gain from it, then you should go for it.