Weighing the Pros and Cons of Rental Properties
Have you thought about purchasing a rental property but aren’t sure what is involved? It’s an investment that boasts some impressive opportunities, but there are also some drawbacks you will need to consider. With that in mind, here’s a careful look at a few of the pros and cons to help you decide if owning a rental is right for you.
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Adding to Your Income
Pros: Rental properties can be a terrific way to enjoy steady passive income. Not only is it an opportunity to make money, but there are also ways to streamline how that money comes in; Brick Underground notes there are several apps that make rent collection a breeze. Additionally,
you can set yourself up as a limited liability company to gain tax advantages and to safeguard your assets in case you’re ever sued. Fortunately, creating an Oklahoma LLC is a relatively simple process which can be made even easier if you hire a formation service to file for you.
Cons: An income boost might seem like a no-brainer, but it isn’t always as straightforward as that. Non-paying renters can be bothersome, and there are often several steps involved in resolving the situation. For instance, you should visit or call a past-due renter before you do anything else, especially if it’s someone who normally is timely. Other than that, you can serve a written notice to pay or move out, but bear in mind that if you haven’t already advertised the unit and you don’t have a waiting list, it might be some time before you fill it. It doesn’t take long to feel the impact of a non-paying tenant, which means that once you’ve taken all the steps you’re
able, you may need to end up evicting a non-payer.
One way strategy to help you keep things in line is to hire a property manager. Great property managers do extensive background checks on potential renters, looking at things like credit history, employment history, and income level. On top of all that, they can also address problem tenants, but with thorough screening, you won’t see as much of that. A top-notch property management agency will also be able to assist with other aspects of managing your investment, like upkeep and maintenance. When reviewing companies, look for one with a solid reputation, a clear fee schedule and that is proactive with communication.
Keep Up with Upkeep
Pros: A well-maintained property is most likely to increase in value. You can make upgrades to a property over time to ensure it continues to see added value, which also helps attract better tenants. Keeping your property in shape not only keeps tenants happy, but it also protects your investment, improving resale for a later time, and adding to your net worth. You can check your property’s value using an online calculator or hire an appraiser for a more accurate number.
Cons: Basic maintenance is easy to let slide when you don’t live in the residence. While exterior issues are noticeable, it’s more challenging to remember interior things like changing air filters. There are obviously expenses involved in keeping up a property as well, but if you’re pretty
handy and live close by, you can take on those duties during your downtime. Safety hazards should be addressed immediately, which can also mean late night calls. If all that sounds like more than you want to handle, those are issues a property manager can tend for you.
You Have Rights, and So Do They
Pros: Since you own the rental property, you have certain legal rights that go hand-in-hand with the role of landlord. Obviously, you can collect rent, and if you have a non-payer, you can evict them through proper legal channels. With notice, you are also allowed to enter the rental, or you
may enter in the event of an emergency. You can also require a security deposit and then apply it to repairs or unpaid bills.
Cons: If a tenant becomes injured on your property, even within the unit that person is renting, they can potentially sue you for contributing to the injury. For instance, if they are climbing steps and the railing gives way, it could be considered a failure on your part for providing a safe living environment. With that in mind, you should have liability insurance. Liability coverage is often part of a landlord insurance policy, which you should get for any rental property.
Owning a rental property clearly has its upsides and downsides. When deciding if it’s right for you, weigh your situation carefully. It might sound like a lot of work, or it might also be a terrific source of added income.