The Hidden Burdens of Being a Landlord
On the surface, being a landlord seems to fairly straightforward and profitable. Renters live on your property, help pay it off through their monthly rent, and you even get cash flow. However, landlords will be the first to tell you that managing a rental property is extremely stressful and expensive. Often it is a job that requires tons of hard work, time, and patience to even stay afloat. Here are just a few of the hidden costs to being a landlord.
Finding Qualified Tenants
With today’s housing issues, finding tenants should be as easy as putting up a few ads and sticking “For Rent” signs in the front yard right? Perhaps, but not if you want to avoid the bad renters and horror story situations many landlords have experienced. If you don’t take the effort to check each potential renter’s references, employment, credit score, and criminal records, you could end up playing Russian roulette. Ranging from chronically late rent payers to renters that have punched holes through all the drywalls, sold your appliances, and destroyed the floors beyond recognition; bad tenants can be more destructive to your property than natural disasters.
While legal expenses vary depending on your situation, the costs of hiring a lawyer just to draft up rental contracts can be pricy. Some attorneys charge by the hour, while others ask for a flat rate fee of around $150 to $200 to provide landlord services. If you need to evict a truant renter or settle a dispute, you must be prepared to pay for those extra legal expenses as well. In some parts of the country, landlords are also required to register their property and have it inspected on a yearly basis. Any problems identified by the inspector must be fixed before renting, and all those administrative fees add up quickly, costing hundreds of dollars each year.
Higher Insurance Costs
Rental homes often cost more to insure. When you rent out your property, you legally change from being the “primary occupant” to an “investor”, and your insurance price reflects that. On average, the premium for insuring a rental is 25% more expensive than standard homeowners insurance.
More Taxes and Maintenance Costs
Especially if your rental property used to be your primary home, a landlord’s tax situation often becomes less favorable when their home becomes an investment property. In regions that have homestead exemption, landlords end up paying more property tax. After not living on the property for a certain length of time, landlords also run the risk of losing their capital-gains tax exemption. Maintaining your rental also carries many other liabilities, as you are burdened with fixing or replacing more than one roof, refrigerator, AC unit, and other costly appliances at any given time.
Even the toughest landlords can find the stress of dealing with a rental property too much to handle. If you’re tired of bad tenants and sinking tons of money into repairs, contact Freedom House Buyer today. We can take a problem property off your hands and help you move on.
Learn how to get rid of bad tenants on our website here.