Owning a rental property is one way of achieving the dream … whether that is building a wealth portfolio, funding a growing family’s needs or just creating ultimate financial independence.
But in buying a rental property you not only become a property owner, you also take on the responsibilities of becoming a landlord. Granted, there is a certain romance associated with buying a rental property but in the majority of cases, owing a rental property is hard work.
Ask yourself if you are ready to treat your rental property as your newly-acquired business. As a business owner, you must adhere to the laws, rules and regulations that govern rental housing, and have a clear understanding of appropriate rental rules and practices.
Are you willing to:
- Devote time and hard work to manage your business
- Make repairs and maintain your property
- Provide services to your tenants
- Deal with difficult tenants
- Become familiar with state, local and federal laws and regulations regarding landlord and tenant relationships, and
- Consult and hire professionals, such as lawyers and accountants
Hopefully the answer to those questions is yes!
Some Landlord responsibilities
Along with the benefits of owning an investment property, there are also increased responsibilities and possible drawbacks. For instance, you are responsible for the full mortgage payment, even if your tenant does not make his/her rental payment or your rental property is vacant.
You will need to budget for unexpected expenses, such as problems with tenants which may incur legal expenses. Also keep in mind the following:
Repairs and maintenance
Maintenance and repair costs often can be substantial. However, you must keep your rental property in good condition; you’re responsible for providing safe and decent housing for your tenants. Also be sure the building meets all local codes before renting to anyone.
You must have a clear understanding of laws, rules and regulations that govern rental housing. You may be liable for any lawsuits due to complaints filed as a result of your failure to adhere to these laws, rules and regulations.
You must make yourself, or someone you designate to act on your behalf, available to your tenants 24 hours a day in the event of an emergency.
To be a landlord you need to understand and accept that you need access to cash. We’re not talking about the initial property purchase here but the money you will need to have set aside to cover emergency maintenance expenses on your rental property.
You are taking a risk
Many people think owning rental property is always a money-making endeavour. However, that couldn’t be further from the truth. Investing in rental property has plenty of risks including non-payment, property damage, prolonged vacancies, and more.
Bad things do happen
We’ve all heard rental horror stories and the fact is that many of them are true. You’d be amazed at the kind of damage people can leave behind, and how much of a headache it can cause.
Hopefully the above list doesn’t sound too scary. There are plenty of fantastic benefits in building up an investment property portfolio, too. Just make sure you go into it with your eyes wide open.