There are several benefits to owning rental property. If all goes well, you have a steady stream of income with minimal effort on your part. That is if you have a good tenant, nominal repairs, and your property taxes don’t skyrocket. But, what if the home needs a new roof? Or, you must evict a tenant? This is all part of being a landlord. Why should you consider selling your rental property?
Marketing your rental is a time-consuming process. There are many free options to use but you still need to qualify all the prospects. Of course, the rental property must be marketable as well. You will want to invest in simple durable landscaping. The condition of the home will determine your turnover costs. Simple wear and tear items are not covered by a security deposit. You will need to determine what to replace or retouch to attract a new tenant.
The income is not always steady:
Even the best tenants leave after their lease is up. Renting is temporary. Sometimes there is a gap between when a tenant leaves and a new one moves in. You will need time to turn the rental before a new person moves in. That takes a few days and you don’t receive payment for those days. Sometimes, things out of your control can hinder your ability to rent your home. A plant closes, and many people must move away for a new job. All these things cause you to lose income. You may have to reduce the price due to market demand. This cuts into your profits.
Bad or high-maintenance tenants cost you time and money. There are steps you can take to decrease your risk of a bad resident.
Run credit and criminal background checks:
This should be done on all prospects who apply. The cost of each check depends on what company you choose. You can offset this cost by requiring an application fee. This will also increase your chances of working with serious prospects.
Run a landlord background check:
If the prospect signs the authorization form you can call the former or current landlord. There are a few important questions to ask. Did they pay their rent on time? Did they have issues with other tenants (if applicable)? Did they abide by the lease or were there lease violations? What was the condition of the unit? Is there substantial damage to the rental? Would the landlord rent to this person again? Make sure to run a reference checks for two landlords. Some landlords will tell you what you want to hear to get rid of a troublesome tenant. But, if you ask a previous landlord, they have nothing to lose or gain by giving you a reference. They are more likely to be honest.
Verify employment and income:
You want to verify that your prospect has a job. However, they also need to earn enough income to cover the rent each month. The rule of thumb is that rent should not exceed 30% of your net monthly income.
Background checks help reduce the risk of a bad tenant. But, it’s not 100%. A tenant can lose their job while they are renting from you. This may cause them to get behind in their rent and other bills. They may also commit a crime while they are leasing from you. You may find yourself evicting these tenants.
The cost to turn a rental and put it back on the market can vary. If you had good tenants, you may need to clean and spot paint. If not, you are looking at an expensive time-consuming task. Carpet replacement, stolen appliances, and pet droppings are a few examples. To prevent this, you need to do two things. First, inspect the property frequently. You can do this if you provide the tenant with acceptable notice. Second, have a detailed lease and stick to it. Being the landlord means you must have tough conversations. Sometimes, those conversations must lead to you kicking out a resident. This is your asset you must protect it.
Evictions are costly for any landlord. It takes time and money to process an eviction. If you play your cards right you can get the resident out by the end of the month. But, then you still must deal with the unit itself. Many evicted tenants damage the rental and leave belongings behind. You must repair the damage and store the tenant’s belongings. The landlord charges the resident for these expenses. But, you can’t expect to see that money soon, if at all.
The landlord laws:
There are laws that you’ll need to be familiar with as a landlord. You must remain up-to-date on all state and federal laws pertaining to landlords. A lawsuit violating these laws would cost you dearly.
You stand to lose money if the neighborhood takes a turn for the worse. If the local economy takes a hit, you will take a loss. If local real estate starts to hurt, then so do you. Your financial assets are poured into this rental. Unlike mutual funds, this loss is not divided among many people. The bank account is the main thing hit.
There will be maintenance on the rental that you’ll need to address. Your homeowner’s insurance will cover catastrophic incidents like a fire. You are responsible for keeping the home up to code regarding safety items. There are many things that will require your attention like plumbing issues and electrical problems. You want to put some of your profits into a maintenance fund to handle these repairs. If you are renting an older home the maintenance costs may dig into your profits. Major things will wear down and need replacement.
Taxes and insurance:
As a landlord, you are responsible for the property taxes and homeowner’s insurance. Your resident should carry their own renter’s insurance to cover their belongings. These costs won’t be a surprise to you. They will be a fixed yearly cost. Bear in mind, it costs about 25% more to insure a rental property than your own home. Whether your unit is occupied or not you must pay these fees.
There are reasons to own rental property. If you market is in a slump it’s a great way to keep an income stream until the market goes back up. Yet, there are numerous reasons to sell the home too. Selling the home gives you peace of mind that you have the money from your asset. Renting is more stressful because you don’t know if you will get that income monthly. Selling the home can save you the hassle of dealing with rent stressors.
Looking to sell your rental property fast? Let our experts help. Contact Seller’s Advantage online or call us at 1-800-208-3243 to get a no-cost, no-obligation quote on your rental property. We purchase homes in AS-IS condition and can give you a cash offer in as little as 24 hours.