Owning Rental Property

Financing rental properties is different than financing a home you'll live in.
Financing rental properties is different than financing a home you'll live in.

Owning rental property is not for the faint of heart. Landlords must be financially ready in case they don't have any renters or if tenants simply decide to stop paying the rent that is due.

An Income Source

Owning rental property is one method people use to ensure a steady income. Indeed, having tenants in a few rental properties can be a viable way to keep a flow of income, especially if the properties are already paid off. Owning rental properties that do not have mortgages attached to them and that also have consistent tenants who pay on time every month can be a fantastic scenario, especially for people who are nearing - or are already in - retirement and do not have substantial incomes from other sources.

Not a Perfect Plan

Owning rental property is not a guarantee of financial success. Consider, for example, a scenario where a rental home goes unoccupied for several months at a time. If the landlord cannot afford to cover the mortgage payments without rental income then the potential for financial problems and possible foreclosure increases exponentially.

In the majority of instances, landlords are also responsible for necessary repairs to the properties even though they do not reside there. For example, if a roof starts leaking it is the landlord - not the tenants - who is responsible for the cost of the repair. Owning several rental properties comes with a real potential for income, but also comes with a real potential for constant repair costs. Landlords who do not take care of their rental properties may find themselves subject to lawsuits from angry tenants.

Hands-On versus Rental Agency


Landlords can make the decision to be hands-on with their rental properties and personally handle all the responsibilities associated with managing a rental property including:

  • Seeking out new tenants
  • Collecting monthly rental payments
  • Paying homeowners insurance and real estate taxes
  • Making repairs and improvements on the home
  • Dealing directly with the tenants regarding any issues or grievances
  • Initiating eviction, if necessary

For a fee, landlords can commission a rental agency to handle all these aspects of renting out properties. There are rental agencies available for both residential and commercial properties.

How do you decide whether to handle the landlord tasks yourself or to instead pay an agency to handle them for you? There are a few factors to consider:

  • Can you afford to pay a rental agency? If your money is already stretched thin every month and you need every penny of the rental income you may not be able to afford to pay someone else to handle everything.
  • Do you like making repairs yourself? If you are very handy and can repair things around the house by yourself then you may not need to pay someone else to handle these things.
  • '''Can you be stern when necessary?" If the thought of confronting a non-paying tenant gives you anxiety, it may be best to pay someone else to handle this aspect of being a landlord.
  • Are you organized? A landlord needs to be organized when it comes to keeping up on the maintenance schedule for a home as well as collecting rental payments and paying taxes and insurance. If you have a difficult time keeping everything straight then it may be worth the money to pay someone else to do it.

Plenty of landlords manage their own properties, and a good portion of these people manage several properties at one time. It isn't an impossible task. On the other hand, it is a responsibility that should not be entered into lightly.

Have a Plan

No matter how reliable your tenants may seem, always have a contingency plan in case your property winds up sitting unoccupied for several months at a time. With proper planning, this situation can be a temporary setback rather than a potential financial tragedy.

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Owning Rental Property