Renting out a house can be a daunting thought. Is it worth it? That’s a question you need to ask yourself after you’ve considered the information in this blog. It’s a great deal of responsibility to take care of a property someone else will live in. Landlords have to make sure the house is safe, make sure it meets local requirements for rentals, make sure they’re in compliance with Federal, State, and Local housing laws, have patience, deal with different personality types, know how to market the property, and screen tenants… very well.
Consider these common mistakes new landlords make:
- Thinking it will cost less in time and money than it actually does
- Breaking housing laws due to failing to research the laws
- Failing to screen tenants as thoroughly as they should
- Ignoring the property because the tenant doesn’t request repairs as they happen
- Failing to require rental insurance policies of tenants
- Failing to hire a qualified legal and tax professional
Did you know?
- There are different types of insurance for rentals (Read More)
- You could be sued for asking certain questions (Read More)
- You’ll be responsible for providing a safe environment (Read More)
- There are laws governing how a landlord can get rid of personal property left behind by a tenant (Read More on Sec. 92.0081 of Chapter 92 of the Texas Property Code)
- In The Great State of Texas, Chapter 92 of the Texas property code states that landlords are required to install a keyless bolting device on all exterior doors (Read More on Sec. 92.153 of Chapter 92 of the Texas Property Code)
- Property Value Appreciation: Tenants pay for the mortgage, taxes, and insurance.
- Income in the form of monthly cash flow.
- Diversifying your income
- Owning real estate is “less risky” than other types of investments
- Leverage: Even though your house is probably worth more, you’ve only invested the amount you paid as a down payment and your bank lent you the rest of the cost of the house.
- Annual tax advantages: The income received from rent is taxable. The expenses throughout the year are deductible. E.g. Interest, insurance, repairs, upkeep, supplies, materials. Then there’s depreciation, which reflects the decreased value of the property due to wear and tear.
- Small commitment: If it’s only one property, and less than 10 minutes from home, you can easily manage it yourself.
- Time: you’ll need to be available 24/7 to take emergency calls from tenants. Depending on the time of year, it takes 2-4 weeks to find a new tenant.
- Bad Tenants: You’ll inevitably run into the tenant who pays late, trashes the place, or bugs you about every little thing.
- Vacancy: Economic conditions or repairs needed can delay finding a tenant.
- Legal: Landlords must know the laws concerning being a landlord. Even then, a landlord could be sued over health, safety, anti-discrimination, or other legal matters. (A third party could even sue the landlord because a tenant did something to harm them.)
- Money: Owning a rental property is a costly business. Besides mortgage, taxes, and insurance, there are other costs associated with being a landlord. E.g. upkeep, repairs, property management, handyman and contractors, legal, and other Capex costs.
- Unexpected repairs. Some of the small repairs can take a lot of time. Big ones take a lot of money from reserves. (Hopefully you have a few thousand dollars in reserves.)
- It’s a long term commitment!
- Emotional ties are made when one lives in a house. As a landlord, you’ll have to let go of the fact that your tenant may decorate differently or not be as careful and considerate of wearing down the place.
Now that you have more information, you must consider the risk and your own personal comfort level and commitment to providing housing to another human being. It’s a commitment. A commitment that’s not one to be taken lightly. We are talking about someone’s home to be, after all.