Being a landlord isn’t as easy as it may seem on the periphery. Sure, with ideal tenants and no big surprises, renting a house can be a fairly easy way to make an income or pay off a mortgage, yet this ideal scenario isn’t generally the norm. In an effort to give potential landlords a balanced view, let’s examine the downside of being a landlord.
1. Dealing with Tenants
Let’s start off with likely the most difficult part of being a landlord, which is dealing with the tenants. Prospective landlords shouldn’t underestimate the difficulty of dealing with tenants in the course of being a landlord long-term.
This isn’t to say all tenants are going to be difficult, dishonest, unclean, destructive, etc., yet it does mean that dealing with tenants requires discernment, patience, resolve, commitment, and perhaps money (if using a rental agency instead of doing it alone).
Tenants aren’t just retail customers or employees who come and go from the store or workplace, rather landlords have to deal with them on a long-term basis. While this can be a rewarding experience, unless a landlord has excellent discernment and an ability to be upfront with people, renting to tenants can be a nightmare as well.
Of course, the type of house and neighborhood will make a difference in the type of tenants attracted to the rental, yet landlords should remember it takes time to get to know who people really are. For instance, tenants can look and sound great in person and on their applications, yet when an issue occurs (theft, flooded sink, neighbor’s dog barking, etc.) or their expectations aren’t met to their standards, their true colors will come through.
Basically, being a landlord involves dealing with tenants on a long-term basis, which means getting to know exactly who they are deep down inside. This isn’t always easy to discern and can become a real nightmare for landlords when unexpected circumstances reveal contentious personalities.
2. Management Aspects of Being a Landlord
The management aspects of being a landlord involve dealing with tenants, yet also so much more. Essentially, being a landlord (even of one house) is like being a business owner; some business aspects can be outsourced to a property management company, yet this is another monthly expense to calculate.
Potential landlords should ask themselves:
- Do I want to master the IRS Schedule E for landlords?
- Do I want to incur the responsibility for resolving evictions, late fees, damages by tenants, and other potential liabilities?
- Do I want to accomplish the extra bookkeeping or pay someone else to manage it – including a CPA at tax time?
While there may be profit at the end of all the taxable and non-taxable expenses, potential landlords must consider the time and effort it takes to manage the manifold business aspects involved. They also must consider the potential liability involved when renting their houses to relatively unknown people.
While some landlords may be fortunate enough to have great long-term tenants, most landlords deal with many tenants over the years. Considering the average credit score for renters is 650 and in 66% of housing markets, buying is more affordable than renting (stats from mysmartmove.com), great long-term tenants are not easy to come by.
3. Time and Expenses of Repairs and Maintenance
Homeowners already understand how much maintenance and repair houses need every year. As a landlord, add to these duties the tasks of coordinating repairs with tenants and meeting their variable expectations. Then consider that the time spent doing repairs and maintenance isn’t tax deductible; the cost of the repairs is tax deductible, but if done by the landlord themselves, the labor isn’t.
Paying all the repair and maintenance expenses and spending the time to coordinate, hire, or DIY, are big downsides to being a landlord, especially with an older house. Even if most of the expenses can be deducted at tax time, they’ll require landlords to constantly spend money upfront.
Another downside to renting a home is most tenants won’t treat the home as if it was their own; in other words, they may neglect and treat the home harshly, which may lead to more repairs and expenses that wouldn’t normally occur. And if any late payment fees, evictions, or other issues occur, tenants may thrash and damage the home out of anger and malice – creating more repairs and expenses.
4. Dealing with Vacant Rentals
The rental market may be good now, but even this doesn’t mean landlords won’t suffer from vacancy between tenants. Finding the right tenants takes time, as does the repairs and maintenance done between tenants, and taking the first applicant out of desperation or expediency is a gamble not worth taking.
The point is, landlords have to deal with vacant rentals when tenants leave or are evicted. If the latter occurs, landlords may have to pay legal fees and wait out the legal process of evicting someone who won’t leave – one nightmare story details a man who lived free during the eviction process for 274 days!
Hey, “life happens” is the old adage that applies here; applicants may have intentions of staying long-term, yet with job, marriage, and other life changes occurring, they very well may have to move much earlier than expected.
Landlords must deal with these unexpected situations and go through the application process as many times as necessary; in the meantime, rent isn’t coming in and expenses are going out. With enough of these unexpected departures in a short period of time, landlords may have a hard time just breaking even for the year.
What’s the Alternative?
Examining the downside of being a landlord may have some homeowners looking for an alternative to being one. And if being a landlord was an alternative to dealing with the traditional way of selling a home, they may be discouraged all-together!
Don’t worry, there’s good news; the alternative to both is to use Seller’s Advantage to sell the house quickly and without the hassles. Seller’s Advantage has purchased thousands of houses, has an A+ rating with the Better Business Bureau, and has many positive reviews online from past customers.
For homeowners wanting to sell quickly and for the best cash price possible, Seller’s Advantage is the best alternative around. If interested, contact Seller’s Advantage online or call us at 1-800-208-3243 to get a no-cost, no-obligation quote. We purchase homes in AS-IS condition and can give homeowners a cash offer in as little as 24 hours.