Conditions for entering the rental housing market are great right now. Home prices are low, and interest rates are too. Demand for rentals is up, vacancies are low, and are expected to stay that way for the foreseeable future. That means investors could make buying a home and renting it out actually work.
But there are downsides to being a landlord, which any experienced one could explain in great detail. Here are just a few:
- You’ll dread the sound of your phone ringing or buzzing. Too many times, it will be a call or text from a tenant, to inform you of a problem. Overflowing toilets, stopped up sinks, broken appliances or frozen pipes tend to happen when you least want them to—like in the middle of the night, on Christmas Day, or when you’re on vacation.
- Your lease will be ignored. Sure, you’ll spend time and money creating an iron-clad lease to protect yourself and your property. Only trouble is, tenants don’t always read leases—nor do they understand what things like “no pets” really means. And if they do understand what they’re reading, they may think it can’t possibly apply to them. “Fluffy” is just a tiny kitten, so surely you won’t mind if a tenant brings her home, right?
- Tenants will put others in danger. From allowing boyfriends, girlfriends, unemployed kids, ex-spouses or complete strangers to move in without your permission (or knowledge), to using your property as home base for a drug business, some tenants will try to get away with behavior that could put other tenants in danger. They could also leave you liable for their actions—criminal, dangerous or otherwise.
- You may not get the rent on time. Okay, you probably won’t get the rent on time, all the time. Tenants will pay late, or just stop paying completely. In the meantime, you still have a mortgage and other expenses to pay. Landlords need several months’ worth of reserves set aside in the budget.
- There’s a lot of upkeep. Any property requires care. Rental properties get more wear and tear, so they generally need even more maintenance and repairs. Landlords are required to keep their properties in habitable, safe condition for tenants, and professional plumbers and electricians are expensive to hire.
- It’s difficult to get rid of problem tenants. Eviction is not fun, and it’s expensive. In many places, it’s also a very difficult process. To make it worse, some tenants are experts at avoiding eviction, by exploiting laws designed to protect them.
If you’re smart, tough and know how to run a business, landlording could be a good fit for you. Just be picky about the property you buy, and pickier about the tenants you allow to live there. Thoroughly screen all tenants. Run credit checks and criminal background checks with a reputable company. Then, make sure you enforce your rules fairly and consistently.