Why You Should Never Become A Landlord
Landlording. It might sound like a pretty good gig on the surface. I mean, what’s not to love about receiving a steady stream of rental income, building equity over time, and potentially even making a profit if property values surge?
You might think it’s a foolproof plan to financial freedom. But like most things in life, the reality isn’t quite as rosy as the theory. The grass is always greener, as they say – until you actually get a taste of the landlording life.
Now, don’t get me wrong, it’s not all doom and gloom. Some people absolutely thrive as landlords. But today, I’m going to play devil’s advocate and explore why becoming a landlord might not be the right path for you.
9 reasons why you shouldn’t become a landlord
1. Those pesky tenants!
So, you find a tenant who seems perfect. Pays rent on time, keeps the place tidy, the works. But then, they move out and your next tenant is, well, less than ideal. Late payments, property damage, noise complaints – you name it. It’s like playing roulette, and unfortunately, you don’t always win.
The sad reality is that the vast majority of tenants simply won’t care nearly as much about your property as you do. After all, it’s not their investment at stake.
A well-meaning tenant might not report minor issues, like a slow drip under the sink or a small patch of mold in the corner of the bathroom. These minor issues, left unchecked, can escalate into major property damage.
On the other end of the spectrum, you could end up with tenants who are actively destructive, either through carelessness or malice. Imagine walking into your property to find holes in the walls, broken appliances, or graffiti. The damage deposit might not cover everything.
And then there’s the issue of eviction. If a tenant stops paying rent or violates the lease in some other way, you can’t just kick them out on the spot. There’s a legal process to follow, which can be costly, lengthy, and stressful.
2. Maintenance, maintenance, maintenance
It’s not just about collecting rent checks. When something breaks in your rental property, guess who’s on the hook for fixing it? You’ve got it, you.
Whether it’s a leaky faucet, a broken air conditioner, or heaven forbid, a termite infestation – as the landlord, it’s your responsibility to address these issues promptly. And these costs can potentially be enormous, quickly eating into your profits.
3. Financial risks
Property isn’t a risk-free investment. Think about market downturns or periods of high vacancy rates. When the rent isn’t rolling in, you’re still responsible for the mortgage, insurance, taxes, and upkeep. It’s a financial burden that can turn a promising investment sour pretty fast.
4. Your time, it’s a precious commodity
Landlording isn’t a passive investment, no matter what those late-night infomercials tell you. It’s a job that requires time, energy, and a lot of patience.
Screening tenants, addressing complaints, conducting repairs, keeping up with changing regulations – it’s not exactly a set-it-and-forget-it kind of deal. Even if you go the route of hiring property managers, it’s still not a hands-off job. You’ll still need to oversee their work, handle finances, make key decisions, and jump in when things go sideways.
Not to mention the fact that finding a reliable, trustworthy property manager can be a job in itself!
5. Legal and regulatory hurdles
Tenancy laws, building codes, housing regulations – it’s a regulatory minefield out there. Falling foul of these laws can lead to costly fines, or worse, lawsuits. Unless you’re well-versed in the law, or willing to hire someone who is, it’s a whole extra layer of stress that you might not be prepared for.
6. The taxman cometh
Yes, rental income is taxable. And depending on where you live and your personal financial situation, those taxes can be significant.
Plus, there’s the headache of actually managing these financials. It’s a lot of paperwork and, unless you’re a whiz with numbers, potentially a lot of confusion too.
7. The emotional toll
This one’s often overlooked, but boy, it’s a biggie. Being a landlord can be emotionally draining. Dealing with difficult tenants, navigating eviction proceedings, handling emergencies – these can all take a toll on your mental well-being. It’s not just about the money, but the stress and pressure that come with the job too.
8. It could be dangerous
As a landlord, you may find yourself in potentially dangerous situations, especially when dealing with disgruntled tenants. Disputes over rent, property damage, or eviction can escalate quickly and unpredictably. You might be called upon to handle these situations, which can put your personal safety at risk.
9. Liquidity – or rather, the lack thereof
Compared to other types of investments, real estate is notoriously illiquid. If you suddenly find yourself in need of cash, it’s not as simple as selling off stocks or withdrawing money from a savings account.
Selling a property can take months, even years, depending on market conditions. And if you have a tenant in situ (that’s fancy speak for a tenant already living in the property), it could be even more difficult to sell quickly, depending on the terms of the lease.
Many buyers steer clear of properties with existing tenants, especially if those tenants have long-term leases or have been problematic. Plus, some buyers might be looking for a property to move into themselves, and an occupied property just won’t fit the bill.
Wrapping things up
So, are you still interested in slapping on that landlord badge?
Hey, I’m not here to scare you, just here to serve you the truth sandwich, with a side of reality checks. Yes, the prospect of a steady rental income and property appreciation is tantalizing, but it’s not just sunshine and rainbows in the land of landlording. It’s more like unpredictable weather and a garden that’s got more weeds than you have patience to pull.
But if you’ve read all this and still feel like you’ve got what it takes to juggle the tenant roulette, maintenance madness, and liquidity limbo, then who am I to stop you? Just make sure you’ve got a sturdy umbrella for when it rains, a good pair of gloves for the weeds, and perhaps a sense of humor – you’re going to need it!