Should You Become A Landlord
There are many pros and cons to becoming a landlord. Given the right circumstances, becoming a landlord can be a way to put some extra cash in your pocket and receive tax deductions on expenses and depreciation for property taxes, mortgage interest rats, repairs and maintenance costs and marketing. However, you must determine whether becoming a landlord is right for you by deciding what you can rent your property for. You can do this by looking into rental rates in the general vicinity of where your property is located. You can also check with a real estate broker to see what the area's vacancy rate is. Once you subtract property expenses, you must also account for other expenses like mortgage payments if there are any, insurance, utilities, repair and maintenance costs. Maintenance costs can become significantly high if you are renting an older property. To determine your profit, subtract expected vacancies and possible expenses from the annual rent. If you see that you will gain a profit of $100 or $200 a month, it may be worth becoming a landlord.
It is very important that you treat your responsibility as a landlord as you would treat a business. You might want to invest in hiring a management firm, especially if you are living outside of the state of where your rental property is located, I do not recommend doing this! A rental firm will screen qualified tenants by running credit and background checks and help you determine what a reasonable monthly rent. If you choose to rent on your own, make sure you know everything there is to know about the tenant(s) you are renting too, since good tenants are rare and your profit could go down the drain if your property is destroyed.
Good tenants or not, it is always wise to keep a cash reserve for unexpected rental expenses or for rental payments should your tenants decide to move. I suggest at least 15% of the yearly rent amount. It will probably take a few months to go through the process of renting to another qualified tenant.
A landlord should also make sure that there is a rental agreement with a monthly fee that is fair and allows for raising the rent when it needs to be raised to keep up with the cost of living. You want to make sure that your tenants have the feeling that you respect their needs and that they respect your. Set reasonable policies and procedures and stay in control, and you will reap the benefits that a good landlord can realize.
ABOUT THE AUTHOR:
Richard sells real estate in the San Gabriel Valley which is about 12 miles South of Los Angeles. For more information, visit his website at http://www.westsangabrielvalleyrealestate.com
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