In case you don’t know, my husband and I own two small rental properties in the town where we reside. One of the homes we own was bought with the intention of turning it into a rental property and the other was turned into one after serving as our “starter home.” Here is an email that I got from someone after they recently stumbled upon this article at Get Rich Slowly:
Hi. I read one of your old stories on GRS about your rental properties and I was wondering if you still think that it was a good idea. Interest rates are low and properties in my area are going for pennies on the dollar. I’m seriously considering jumping into the game. I just need some encouragement. Thanks.
Although owning rental property can sometimes be a pain, I think that it’s been a good financial move for us over all. At this point, we’ve been landlords for 6 or 7 years and we’re about 12 years away from owning our rental properties free and clear. Once our two properties are paid off, we’ll have about $2,000 of additional passive income per month at our disposal. Sounds amazing, doesn’t it? Of course, owning rental property isn’t all puppies and cupcakes, and there are some things that you should know before you “jump into the game,” as you so eloquently put it. Here are a few things that you should consider before becoming a landlord:
People lie. All. The Time.
As most landlords would tell you, properly screening your tenants can save you a lot of heartache and stress. Why? Because they lie. All. The. Time. It’s important to properly screen tenants in order to discern fact from fiction. I’ve done credit checks on potential tenants only to find that they’ve been evicted from the last three places they lived. I’ve seen people lie about how much they make at their job, or even having a job at all. Fortunately, most renters are easy to deal with and honest. However, as with most things in life, the bad apples can make you question your faith in humanity. I know I have.
People will break your stuff.
One of our former tenants left about $6,000 worth of damage in his wake. It was weird stuff, too. For instance, all of the interior doors in the house were missing. The carpet looked like someone had poured motor oil all over it and I swear somebody pissed on the walls. Oh, and they broke the front picture window and replaced it with a window that didn’t even match…without asking! And remember, this all happened within a fairly short amount of time when we thought that everything was going fine. Sure, you keep landlord insurance on your property, but those policies typically only cover real structural damage (Check out CIA Insurance Ltd. for landlord insurance rates). The bottom line is this: people will break your stuff and once they leave it becomes your problem.
People will make you feel awkward.
Now, it doesn’t really bother me to tell people “no.” Hell, I actually enjoy it sometimes. But, Greg absolutely hates it. And, being a landlord means that you’ll often be in the position of not giving people what they want. Like for instance, I’ve had tenants ask me if they could get a new puppy. No. I’ve had them ask if they could repaint the interior of the house. No. I’ve had people try to convince me that I was violating some sort of law by not renting to smokers. No. Being a landlord means that you might be put in all kinds of uncomfortable situations where you’ll have to stand your ground to protect your investment. Learn to say “no” and mean it.
With interest rates as low as they’ve been, I’ve seriously considered picking up another rental or two. However, we’re busy folks and I just don’t feel like we have the time to deal with it right now. Still, I think we’ve done well with the two rental properties we have and I am certain that they’ll continue to pay off in the future. While it’s certainly not all puppies and cupcakes, I believe it will be worth it when we’re old and gray and rolling naked in bundles of money. A girl can dream, am I right?
If you own rental property, do you have any advice for Sarah? If you’re not a landlord, have you ever considered becoming one?