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People often have misconceptions about what owning a rental property is like. You might think it’s a simple source of income or that the legal complexities are best left to those with a real estate background. The truth, however, lies somewhere in the middle, so we’ve pulled together key pros and cons to help you make a sound decision.
Renters: The Good, the Bad, and the Ugly
Renters can be wonderful people, providing you with a steady flow of income and taking care of your property as if it were their very own. While top-notch renters are worth their weight in gold, bad renters can cause a lot of stress, be hard on your property, and drain your wallet if you aren’t careful. You should carefully screen potential tenants to help weed out the bad ones, making them complete an application process, asking pointed questions, and running a credit check. Sometimes, bad renters slip through anyway, and then you can have any number of headaches. Some common problems include issues like non-payment, noise, destruction of property, and being unkempt, which can frequently lead to pest control issues. The worst of tenants might require legal battles and eviction.
To avoid jumping through hoops and enduring endless headaches, a trustworthy property manager can bring tremendous peace of mind. Not only can a property management company take on sifting through potential tenants, but they can also deal with managing the income and oversee the maintenance of the property — even during late-night emergencies. To get the most out of your investment, be sure to look for a property manager with transparent pricing, 24/7 support, and excellent online ratings on sites like Google and Yelp.
Maintaining the Property
Taking great care of your rental property can be more than a source of pride. With it in top condition, you are more apt to attract the kind of tenants that make owning a rental a joy. Not only that, by keeping up with wear and tear, you ensure your property maintains its value.
Most tenants don’t care for a rental the same way homeowners do, and repairs can really add up. Some tasks are pretty simple and not that expensive, like caulking around tubs and painting walls, so you can probably do them yourself with a little time and a few tools. However, if there’s a roof leak or plumbing problem, you might need to hire a pro.
Enjoy Tax Advantages
There are a number of deductions landlords can take on their taxes. If you have a mortgage on the property, you can deduct the interest you pay on the loan. Property tax payments can also be deducted, and if you pay a fee to your local government to own a rental unit, you can normally deduct that expense as well. Your outlay toward insuring the property is another potential deduction, along with depreciation, utilities, professional fees, and expenses related to maintenance and repairs.
However, you cannot deduct your payment toward the principal on your mortgage. Also, bear in mind that if you have a non-paying renter, your taxes will still be due, even when income isn’t flowing. On the upside, since professional fees relating to landlord duties are deductible, if you hire an attorney to help with an eviction, you can deduct the expense.
Owning a rental property can be immensely satisfying, and it can be a terrific source of added income. If you’re trying to decide, explore your options carefully. Sometimes, it can be pretty complicated, but there are some worthwhile perks in the right situation.