It can be quite convenient to receive passive income regularly from your rental property. As a landlord or rental property owner, this is just one of several benefits you can enjoy.
However, there are also a few pain points you need to consider — whether it’s terrible rental contracts, rental property taxes, or disorderly tenants.
To help you deal with these issues, you may need to consider working with property tax reduction consultants, rental real estate lawyers, and other industry professionals.
The pros of owning a rental property
For one, rental property is a good source of passive income. Renters will pay you every month in exchange for a decent place to live in. While it may be referred to as “passive income,” you still need to make sure the property is in good condition, lest you turn away potential tenants.
Choosing to rent out your property is also a viable recourse to selling a home. If you find yourself in a market where it’s challenging to sell — especially now, amid the COVID-19 pandemic — this may be an ideal option.
There are a couple of upsides to this. For instance, you can use rental income to offset future losses on the house. If your home depreciates over time, it won’t be too big of a loss when you sell since you were renting out the property prior.
Another benefit of owning a rental property is that you can write off property ownership expenses (e.g., insurance, mortgage interest, repairs, and maintenance). The investment you put in ultimately goes back to your wallet. Just make sure to promptly report your rental income and expenses on the year that you’re earning or paying them.
The cons of owning a rental property
As alluded to earlier, being a rental property owner isn’t exactly a walk in the park.
As you can imagine, dealing with renters can be difficult. Unruly tenants can wreak havoc on the property — damaging furniture and appliances or vandalizing walls. Some tenants may even avoid paying rent altogether and keep you in a constant state of disarray.
And if you find yourself in an argument with a tenant over a dysfunctional HVAC system, you may be held liable in the eyes of the law. That is because a tenant can withhold rent if you neglect to schedule long-overdue repairs. Loopholes in your rental agreement or lease with a tenant can also leave you with the burden of having to pay for any property damage — intentional or otherwise.
That’s why you need to vet tenants thoroughly. Accept only those who meet your criteria. Additionally, work with lawyers or consultants specializing in rental real estate to ensure your contracts are foolproof.
Lastly, aside from the considerable cost of purchasing a property, significant capital is still needed to make sure the property is in the best shape possible. You need to set aside expenses for maintaining electrical installations, plumbing, roofing, as well as heating and cooling systems.
And if you don’t have time to attend to all these tasks, you would need to hire an estate agent to manage and oversee the property.