Deciding Whether Or Not to Be a Landlord

Are you considering becoming a landlord? The reality is that you can make a decent investment in your future by purchasing properties that you then rent out, but it takes a keen eye and understanding of the real estate game in order to make this investment dream a reality.

Reasons to Purchase Rental Property

In an ideal situation, purchasing rental properties will help you create a solid investment into your future. In order to accomplish this dream, you will need to purchase properties and then rent them out to tenants that pay you enough to cover the cost of the mortgage payment, taxes, and insurance. In this way, you essentially purchase a home without having to make any payments on it. Then, once the mortgage is paid off, you own the home that your tenants helped you buy. If the property value increased, you can make a very large profit in this manner without having to spend much on your investment.

The Downside to Purchasing Rental Property

Although purchasing rental property as an investment may seem like the ideal situation, there are some potential downsides to becoming a landlord that need to be taken under consideration. For example, if any problems develop with the property, you will be responsible for taking care of the issues. If the plumbing becomes damaged, for example, you will either need to repair the plumbing yourself or hire someone to do the job. Either way, it can be a very costly process that will cut into your profits.

Another potential downside to being a landlord is the possibility of having bad tenants. The reality is that most tenants do not care for a rental in the same way they would a home that they own. Therefore, it is essential to carefully screen potential tenants and to have a solid contract with them that will allow you to recoup the cost of making repairs to damages that they cause.
Of course, there is also the possibility that you will not always have tenants in your rental, which means you will have to cover the cost of the mortgage on your own. Or, in some cases, the value of the property may actually go down over the years rather than go up.

Depending upon your monthly mortgage payment amount and the cost of insurance and taxes, you may also have difficulty finding a tenant that is willing to pay enough rent to cover all of your expenses. In this case, you will need to pay the difference. As a general rule of thumb, you should be able to ask for rent that is equal to 1% of the purchase price of the home, but this is not always possible and you should not automatically assume that you will be able to get that much rent from a tenant.

In the end, deciding whether or not you want to be a landlord is a very personal decision. As with any type of investment, there are always risks associated with purchasing homes with the intent of renting them out. Therefore, it is important to do your research and to choose your homes wisely in order to have the best chance for success.

About the Author:
Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.byownermls.com/, a For Sale By Owner MLS service, the leading real estate search engine of homes for sale by owner (FSBO). For more information, please visit http://www.byownermls.com/.