Part 1 in our series Guide to Becoming a Landlord.
Have you thought about renting out an investment property but aren’t sure if being a landlord is right for you? This article will help you evaluate the benefits and responsibilities of being a landlord so you can decide if you’re ready to put out the “For Rent” sign.
1. Are you ready to become a landlord?
Ask yourself the following questions.
- Are you OK with other people using your property?
- Are you ready to give up the use of the property, if you have been using it on a regular basis?
- Do you have the time, energy, and resources to ensure your property complies with state and local rental property regulations?
It also helps to think about potential challenges involved with being a landlord as well as possible solutions. For example, can you afford to consult with an attorney if any legal questions or concerns arise? This is also a good time to decide whether you want to hire a property manager to handle management and any issues related to the rental property or take on the responsibilities yourself.
2. How familiar are you with the benefits of becoming a landlord?
Being a landlord brings an opportunity to generate cash flow from your properties. Doing some research can give you a better idea of a property’s income potential and tax benefits.
If you need to fix up your property a bit before you can rent it, estimate how much it might cost. Then research on market-rate rents for similar properties in your location to get an idea of what you could charge. If you plan to include utilities or services, such as lawn mowing, in the rent, you’ll need to get an idea of what they might cost and subtract them. While not a complete picture, these numbers can give you a basic snapshot of the income you can expect from your rental property.
In addition, there are many tax benefits of owning rental properties. You can deduct mortgage interest, landlord’s insurance expenses, necessary repair or maintenance expenses and many other expenses of running your rental business to help offset your taxable rental income. You can learn more in this article about tax benefits for landlords.
3. Are you aware of your responsibilities as a landlord?
Along with the benefits of being a landlord come responsibilities. Knowing about your obligations beforehand is better than being surprised later.
As a landlord, you’re required to ensure the home is habitable, with a solid structure and systems, including plumbing and heating. It also means you’ll need to make timely repairs when things go wrong. And you’ll need to prevent and eliminate pests, such as mice and insects, and possibly deal with any environmental hazards, if applicable.
Availability to tenants will also be important. The tenant should be able to reach you at any time of the day in case there’s an emergency at the property. In non-emergency situations, you should respond promptly to questions and listen patiently to complaints and concerns.
Sometimes, the responsibilities of being a landlord sound overwhelming. If that’s the case, and you still want the benefits a rental property can provide, hiring a property manager could be a good solution. Ultimately, you must weigh your options and decide on the choice that will work best for you and your circumstances.
For more information about becoming landlord, check out these articles: