Every now and then a real estate investor will think about becoming a landlord.  Is it worth it?

Many real estate investors will think about becoming a landlord, with your own rental property, from time to time.  It seems like an easy way to bring in a regular monthly income on a long-term basis.  Plus, you don’t have to spend a lot of time each week looking for new properties to invest in. 

However, a lot of investors will caution you to avoid the tenant business.  It’s got a lot of drawbacks and can actually raise your blood pressure!

Holding Costs are High!
When you become a buy and hold landlord your holding costs skyrocket.  Many landlords end up waiting between 3-6 months for a new tenant to move in.  So in that time while they are waiting for the tenant, the landlord has to keep up the property and pay the electric, gas, and other utilities. 

Re-renting Fix-up Costs are High!
As a typical landlord you also end up paying a lot to get the apartment or home ready for a new tenant when the old one moves out.  This means you’ll be paying to get new carpet, paint the walls and so on to make that place look good for a new renter.  A deposit won’t cover the costs to get that done.  In any case, you aren’t supposed to use the security deposit each tenant brings in, to cover the costs of regular wear and tear on the rental between tenants.

Short Leases Equal High Turnover!
A typical lease agreement between the landlord and a tenant lasts about a year.  A good number of your tenants will end up moving at the end of that year instead of renewing the lease with you.  Not all of them, but more than a few.  This high rate of turnover increases your costs as a landlord because you’ll have more holding costs between tenants and you’ll have to prepare that rental for new tenants each year. 

Lots of Complaints from Tenants!
A part of being the typical landlord involves getting complaints from your tenants.  Most often this concerns maintenance issues.  The drains get clogged, the air conditioner conks out, or the garbage disposal stops working.  These are all the landlord’s responsibility to maintain so the tenant has a livable home.  You would have to deal with getting the tenant complaints fixed in a timely manner and absorbing the cost of fixing problems with the rental property.

The Solution!
You can own rental property after a manner by leasing out the properties instead.  A lease with the option to buy the property can have many benefits.  You’ll be able to put the responsibility for fixing-up and maintaining the property into the hands of the lessee.  Leasing property also means you can place the tenants in the property for an extended amount of time.   The length of your average lease can be about 3 years or even 5 years.  So, you’ll have a lower rate of turn over and few holding costs on that lease property. 

A down real estate market is actually one of the best times where you can make your fortune as a landlord.  With the help of a good landlord attorney and knowing your landlord rights, you can prosper. 
As the price of property drops in most of the U.S. and homes are foreclosed on at record numbers, this is a prime time to invest in some real estate to rent out.  After the market has recovered down the road, then you can likely sell the property for a profit.  However, as you know, renting out property makes you a landlord.  And, becoming a landlord requires some commitment and a good understanding of your landlord rights. 

While there is no one single “landlord legal guide” for you to consult, the use of a good landlord attorney can be priceless if you will be renting out the investment property you own.  Your landlord attorney can work with you to make sure that you clearly understand all of your landlord rights and responsibilities right from the start.  They can help to advise you on finding good quality tenants, and they can help you when you have a tenant you have to evict as well. 

Becoming a landlord is not for everyone.  Many real estate investors want to purchase property and then turn around and sell it for a profit.  However, when you become a landlord you own that property for a while and have the potential to make more money from it over time than if you quickly flipped it or sold it wholesale to another real estate investor. 

If you think about all of the foreclosures happening today, where will all of those people go to live?  The quick answer is that they will become renters and there will be literally millions of them in the market for a home to rent in the next few years.  Because of the sheer number of potential future renters, becoming a landlord is looking to be a very attractive option for many people who invest in real estate. 

As you might imagine, becoming a landlord can be wrought with calls in the middle of the night and complaining tenants.  You can help insulate yourself from some of this by hiring a property management company to handle your rental properties. 

You can also insulate yourself by offering some of your properties as least option to buy.  When you do a lease option you can have your tenant be responsible for repairs and upkeep to the property which keeps you out of the traditional landlord role and one where you are more of a lender with a mortgage interest in the property.

No matter how you look at it, becoming a landlord today looks like it will be profitable for many years to come.