Being a Landlord It's Not All Puppies and Cupcakes - picture of for rent sign in front of house
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Being a Landlord: It’s Not All Puppies and Cupcakes

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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.

-Sarah H.

Sarah,

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.  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?

 

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72 Comments

  1. Like saying no, you need to be immune to “hard luck” stories. The last thing you want to do as a landlord is let someone else’s problems become your problems. You’re not running a charity, you’re running a business.

    1. Yep, and I’ve fallen for a few! I’ve gotten wiser though =)

  2. I’ve never owned rental property, so no advice other than to take the warnings about it being hard work seriously. If you guys add properties, at what point might you turn to a property management company?

    1. I wouldn’t use a property management company for a few reasons. We have had long-term renters for the last three years and have barely had to do anything other than have the furnace/AC serviced. If I had a property manager, I would’ve handed them ten percent all this time to do nothing. I’m also very “hands on” and don’t let go of things very well. I know myself- I would just end up micromanaging the property manager and causing everyone more work =)

      1. Holly,
        This is super smart. It is easier to get a sense of who people are if you meet them yourselves, if you let the property management company handle selection they are more concerned with getting it rented quickly versus the quality of the applicant.

  3. We rent out our basement and one thing I would say is that problems always cost more than you think. Electricians are expensive, plumbers are expensive, moving a wall is expensive, and DIY is hella time consuming. The income makes it all worth it, though, at least in my opinion.

    1. Yes, it’s worth it if you have the money and patience to deal with it!

  4. I think we want to get into the rental property market, but I don’t think we will be using our current home. We will scope out the perfect house and rent that instead. Great post!

    1. Let me know if you want any tips on the perfect rental house! I got some ideas!

  5. Mum and dad have a few house around the UK they rent out although they’ve been lucky over the years. They’ve always had long time renters who haven’t given them much grief but I can only imagine what some landlords go through. They said it was the best decision they did with their money as they get extra income now that the houses have been paid off years ago. I think we may do the same.

    1. We have AMAZING renters right now. That makes all the difference. I hope that they never move!

  6. I know it is very tough handle people who lie. Screening tenants can be really painful job when it comes to renting your property. Once I am stable with my income, I may plan for rental property in future

  7. The no part is where I’d run into trouble. I have seen the effects of not screening renters so that would be my number one priority. I would just have to learn how to say no to people. But, if I had a large sum of money put into a rental it might make it a little easier.

    1. Exactly. It’s a totally different game when your own money is tied up in the property. Honestly, it makes saying “no” pretty easy.

  8. I definitely have an interest in being a landlord, I think it would be a great way to eventually have passive income. I think if I ever did, it would probably be turning my starter home into a rental. I’ve got some friends who are landlords, they have definitely told me some terrible stories about dishonest, dirty, and damaging tenants.

    1. Yes, it’s true. Fortunately, most people are normal!

  9. I am HUGE on rental properties. However, I have really small cojones 😉 when it comes to confrontation. I don’t mind saying no but I either get all riled up or get walked all over if confrontation arises. I don’t know if me being a landlord would work out well. I do know that I will get rental properties down the road, know the risks involved with people destroying things, but will definitely pay a property manager to deal with the headaches.

    The Warrior
    NetWorthWarrior.com

    1. Ugh, except that they’re still YOUR HEADACHES. The property manager won’t be over at the house painting all night and cleaning up filth. You will be.

  10. Wow, that one guy who caused all that damage sounds like a winner! We’d love to get into real estate, but we just simply do not have the time right now to adequately manage it. I think our struggle would be telling people no and the fact that neither one of us are mechanically inclined so that would add extra cost. If you can swing it though, I think it’s a great way to bring in some additional income.

    1. He was actually a really nice guy who ended up having some serious personal problems!

  11. I had a liar, she said her BF lived in the US and would visit once a year, the guy spent 5 nights a week at my place! And she wouldn’t pay double occupancy. That is the part I hate most, people lying.

    1. I hate a lease with a “visitors” policy, setting a cap. I rent out a room in my house, and really don’t feel like signing a lease with an individual and ending up living with a couple 🙁

      1. *have* a lease capping the number of days visitors are allowed. sorry for the typo

  12. Holly! Of all the articles I’ve read on the subject, this one and one other on RFI are the only ones that kept owning rental properties in consideration. The rest made it totally unappetizing. So thanks for that. Saying no is a terrific skill to have and I can well imagine it comes in handy as a rental property owner. Congrats on your success as a landlord!

  13. We’re approaching our first anniversary of becoming landlords, and aside from the tenants showing up drunk for the move in walk through, they have been ideal. We do use property management. I think we could do it ourselves, but we really aren’t available all the time to jump on repairs if needed. I also don’t want tenants showing up at my office asking for things. It was a ton of work to get the property renovated and ready for renters, but I would certainly do it again, hopefully later this year.

    1. Hey, to each their own! I don’t mind dealing with it personally….I also don’t really trust anyone else to do it.

  14. In a word,….don’t. If you want to spend all you time and money catering to tenants problems, fine. But that is not how I wanted to spend my retirement. I inherited several rental properties from my mother and am in the process of selling them all. She had several long term tenants who paid on time, however, when they moved you wouldn’t believe how dirty the places were. My mom never inspected the places after they moved in so I had to hire a person to clean the place, repair holes in the walls, unclog a drain which caused water to pool in the basement which in turn caused mold….all because the tenant never told anyone the drain was plugged. Then trying to collect from the deadbeat tenants. The laws favor tenants over landlords so if you need to evict, you have to pay an attorney to go to court. Also, you need to know that when you do go to sell, you have to recapture all the depreciation you took on your income tax return. I’d much rather flip houses than rent them.

    1. HA!

      I have heard so many people have terrible horror stories! Maybe one day we will be sick of it too…but for now, it’s working out fine. =)

  15. I own an apartment building in the Boston area, and although it was a pain in the ass to actually acquire it so far it has been a fulfilling experience. I have dropped major coin on some improvements (thankfully the property is mostly pristine), but they are all cash flow enhancers, not “fixes”. The trick to this sort of thing is to get the right tenants in place and then provide excellent customer service.

  16. Tara @ Streets Ahead Living says:

    As a tenant in NYC, I know how terrible other tenants can be to apartments. As I’ve had to basically show my soul to get an apartment, I have no problem asking for all sorts of things when getting tenants. I’m a huge fan of credit checks, asking for 1st and last months rent plus one month’s rent of deposit up front, asking for recent paycheck stubs, etc. in addition to having a thoroughly-checked-for-holes-by-a-good-lawyer lease.

    As far as what Mrs. PoP says, I couldn’t agree more. You will get the sob story of how a tenant lost their job and their son got in a car accident and yadda yadda yadda and can I get a break on the rent? It’s hard to say no to someone in need but you can’t afford to lose on money in your own business.

    1. Yes, exactly. It really is a business, not a charity.

  17. I’ve never owned rental property but I’ve worked in landlord-tenant court. Wow, there are some really bad tenants…and some bad slumlord type landlords too. Definitely need to screen your tenants and when you have a good tenant, try hard to keep them.

    1. Yes, exactly. We have some long-term tenants now and I hope they never move! =)

  18. Rental property ain’t happening for us – too many headaches.

    And I can admit that I’m not the handiest of men, so there goes those savings.

    I’ve spoken to people with really NICE rental homes and the tenants STILL do a number on them before they move out.

    1. Sometimes they do. Some people just aren’t very clean….I have come to realize that!

  19. That’s awful about the $6k work in damages! Would you have or did you take the person to small claims court or something? I have a few friends that have rental properties, and all I hear are horror stories. It at times seems like the luck of the draw.

    1. He didn’t want to be sued so he chose to pay us back. We went through and itemized everything he ruined…I think he owed us about $3400 and he paid it back in monthly payments over two years.

  20. I think I’d have a hard time being a landlord. LOL! It’s good to hear the “other side’s perspective so when I ask my landlord to do something I’ll keep that in mind. On the flip side it’s sometimes hard to be a tenant and although my landlord is really nice, there are so many things falling apart in my apartment due to general wear and tear (like a ton of paint peeling in my bathroom) and my landlord has no interest in fixing it.

  21. I don’t understand why people break stuff when they know it’s not theirs. That’s just very disrespectful. If they do not like seeing those stuff inside the house, they can easily inform the owner about it. Right? This planet is really running out of good denizens!

  22. My father owned rentals from time to time when I was growing up. Even with property managers it always seemed to be such a hassle.

    (He ended up donating a house to the local university when a man shot his wife in it…)

    I would much rather get my investment income from index funds!

    1. Ha!

      I feel the same way sometimes…but our rentals are part of our plan to pay for our kid’s college so that keeps me motivated. They’ll both be paid off before the kids graduate from high school. Then we’re going to use the monthly rental income (along with what we’ve saved) to pay for college.

  23. I’ve always thought about becoming a landlord, but it requires quite a bit of capital up front and it’s a bit too risky for where I’m at right now. That being said, I’m definitely not against it if an opportunity arises in the future.

    1. I wish we could buy at least one more…but now isn’t really a good time for us either.

  24. We’ve rented out a room in our house for the past three years and haven’t hit many snags so far, knock on wood. But I think our luck is mostly due to the fact that we’re right on top of the renter and any issues that pop up. Something breaks? We know right away. Painting and puppies would be pretty easy to spot.

    Once we buy our next property in the next 12 months, I’m going to review this post as I think there are good lessons to leverage.

    1. Haha! Feel free to email me with any questions! I also have a lease that I share with friends.

  25. How the heck did he manage so much damage in a short time span?! Did he just flee the house before you knew about all the damage?

    I never would’ve thought off the top of my head to not rent to smokers, but that’s a smart move. That smell seriously lingers. The gentlemen who live above in like to indulge in smoking (of the illegal variety) and it stinks up our whole hallway. Luckily the smell doesn’t seep into my apartment or there would be hell to pay. I wonder if that odor will be apparent when they move out?

    1. I definitely don’t rent to smokers. It smells and stains the walls. I’ve painted enough ceilings at this point in my life…I don’t want to paint any more!

  26. Thanks for sharing your experience Holly. That one tenant sounds very strange. What would you do with a bunch of doors? We are trying very hard not to mess anything up in our place, and when we leave I plan on fixing anything up that needs to be fixed (if they want us to). I would love to become a landlord one day, but you’re right that you have to double check everything potential tenants say. I would never lie to our landlords because I wouldn’t appreciate being lied to!

    1. I never asked what he did with the doors. They were just “gone!”

  27. Owning rental property is similar to any business. It takes work, but the rewards are great. Most of the heavy lifting occurs at the front end.

  28. It’s puppies and cupcakes for us! We actually really miss our tenant when he isn’t around (he lives in our basement suite) and have an awesome relationship with him. Never have we had anything go wrong. But then again, he’s my brother!

  29. Totally agree. I spend a crazy amount of time vetting each applicant like the CIA. At the end of the day it is a leap of faith.

    So far, so good but I never want to rent to roommates again. Double duty.

    1. It really is a leap of faith and you never know how people really are until you start dealing with them. Fortunately, I think I have a keen eye for B.S.!

  30. Very good article. Personally, I believe a rental home is probably the best investment for someone with a modicum of people skills (translation: ability to say “No!” LOL). However, it’s not a short term investment, for the most part. And, like you said, breakage is a constant you can count on, and therefore you need the ability to absorb that without freaking out each time (nudge, nudge to my wife).

    I’m not a handyman, and we’re both pushovers. And I hate the hassle of getting new tenants. Much more fun for me to grow spider webs between my glazed over eyes and a computer screen with stock information scrolling by continuously. So that’s our investment avenue. Go, AAPL! 🙂

  31. I have no rental property, I am a tenant and a good one..lol..I won’t break your doors. Anyway, in the future, I might get into it and see how it goes.

  32. We don’t have any rental property at this time. In part, because property is so expensive in LA and we’re still in living in the first home we bought here. Although I do think if we decided to move into a different home, we’d probably sell our current home over renting it. However, I do think rental property for the right person can be a great investment. Like you said, you do have to be tough when it comes to your renters, otherwise they will walk all over you. But if you can find a great, long-term renter than it really can be match made in heaven!

  33. We rent out our old home and one piece of advice I would give is this: when the last tenants told us they wanted to move out, we did an inspection – everything looked great, so we refunded their deposit.

    It was only when those tenants actually moved out that we noticed things missing – door handles for example, cracked tiles and a great pile of waste in the garden which we had to pay for to get cleared. Don’t refund the tenant’s deposit until you’ve inspected the property once it’s been vacated and only refund if everything is in order!

  34. Rental income is something I want to get into eventually. Maybe this home, maybe another but not until our debt is paid off. Something that seriously interests me though.

  35. We bought our home with the intention of renting it when we moved in 5 years. I am increasingly aware that it might be worth hiring a property manager so I can avoid headaches and focus on things that I enjoy. Our investment will still get great returns, and I get to sleep at night!

  36. We bought our home with the intention of renting it in 5 years when we moved. (Father in law has like a billion rental houses, so we were familiar with what it entails) However, the more I think about it, the more I think we will hire a property manager. The investment will still make a good return, and I can still sleep at night!

  37. While these things can happen, it all depends on who is renting your property. Being a landlord can be difficult but it all depends on the residents. It is good to include certain things in the lease and contract to help you.

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