If you have ever owned a rental property, you can probably relate to the title. If you recently began renting out property or managing rental properties, you’ll soon begin to understand.
While rental properties can be an excellent source of extra income, as well as being an investment tool, they also provide many challenges. As an income property, you can make extra money collecting rents. However, don’t forget there are also expenses. You are not likely to get rich renting out one unit, as the expenses are often nearly as much as the amount you’ll be able to charge. By the time you pay property taxes, insurance, allow for maintenance, and put away a little something in your emergency fund, you will end up with little profit if any.
On the other hand, profit may not actually be your motive at this time. You may simply be using rental monies to pay your note. In essence, someone else is paying your loan, and ultimately paying for your property. This is a good strategy. Also, in the interim, you can still use the property as collateral to borrow money against and perhaps invest in other properties.
While these can be very good options when it comes to real estate, renters can be a headache. Some are quite demanding and will want your attention all the time. They will call at all hours, leave numerous messages, and make ridiculous demands on your time.
Others will be late with the rent, if they pay at all, cause damage to your property, bring pets even though it’s clearly not allowed, move in people that you have not approved, and a host of other things that will try your patience. Sometimes, they up and leave without notice, leaving you to find another renter as soon as you can get the place cleaned up.
It is important to be aware of the pitfalls as well as the benefits before you consider renting out property. Do a thorough check on renters, always demand a deposit, and make the ground rules clear before a renter moves in.