Owning and Running a Rental Property
There seems to be an ongoing conversation about how owning and running a rental is a great way to invest money. And really, what is not to like about it? You invest in something that you rent out and it practically pays for itself. Indeed, owning real estate to rent out remains a great way to invest money.
However, there is a caveat to this dream scenario and that is owning and running a rental property takes hard-work and dedication.
Benefits and Possible Risk of Owning a Rental Property
Owning rental property may be a dream that can very quickly turn into a nightmare for those that are unaware of the risks. If this is something you are considering, it is a good idea to be fully aware of the benefits, risks, and responsibilities that come with being a landlord.
- A main benefit of owning rental property is when you, as the owner, finally start to net a return on your investment. A lot of landlords, those that manage their money well, are not only able to make a profit from rental property but also cover expenses and mortgage payments. It is important to understand how you affect the equity on your rental property and how this can change through the years.
- Another main benefit to owning a rental property is when its value appreciates. Passive appreciation is what happens when the value of a property increases over the years. Whether this is brought about by inflation or improvements of the area. When you become a landlord, you must stay up to date on any improvements in the area as things like new schools, malls etc. can increase your property value. Active appreciation on the other hand can be controlled by you in the way of improvements to the rental property itself by way of renovations or added features.
This is where you, as the homeowner, can really have an impact on how much your rental property will be valued. There isn’t much you can do to control passive appreciation but do your homework on an area before you invest to really reap the benefits.
Of course, just as everything else that has to do with investments, owning rental property comes with very real risks. Just like with benefits, some of these risks are well within your control and some are out of it.
- One big risk you will potentially face is when your property sits vacant. This can be down to a number or reasons such as an undesirable area, bad neighbours, poor accessibility etc. But when your property sits empty, that is money coming out of your pocket.
- Bad tenants are another risk you may have to face. There are a lot of nightmare stories of tenants either not paying or destroying rentals. If you are unsure about how to go about looking for good tenants, try going to the experts for help. Property management companies may charge you some money but at least you need not worry about bad tenants.
Buying property to rent out is not an easy decision to make. However, when considered carefully, this can yield amazing returns.