Now, for the reality check. Here are some challenges to be ready for if you decide to rent out property:
Time. Even though landlording isn't a full-time job, it will take more than an hour or two of your time every few weeks. You'll need to be reachable and available nearly around the clock, to respond to calls from tenants when the plumbing backs up or the neighbor's dog is barking incessantly. Occasionally, you'll need to put in large chunks of time.
Problem tenants. One of the pitfalls of owning rental property is the possibility that you're going to get that rare "tenant from Hell" -- someone who doesn't pay the rent on time, trashes the property, or bugs you about every little thing that goes wrong. Good screening procedures will help avoid such problems, and a properly structured lease or rental agreement will help deal with them.
Difficulty renting. There may be times when the market is soft and it will be difficult to rent your place out. Vacancies are a reality of life for most landlords, but can be made worse by local economic conditions, the need for major repairs in your property, or just sheer bad luck.
Legal risks. If you really want to talk worst-case scenario, you could worry about the possibility that a tenant, prospective tenant, or someone else on your property will sue you over a health, safety, environmental, antidiscrimination or other legal matter. You might even face legal trouble from third parties, for example if your neighbor sues over injuries or damage by your tenant who has started dealing drugs. Knowing your own responsibilities and potential liabilities, and acting to reduce the risk of problems occurring, will limit the chances that you'll face serious legal situations.
Costs. The costs of owning an investment property go well beyond the mortgage. They include property taxes, insurance, utilities, upkeep, repairs, property management costs (if you choose), wages for a handyperson, legal costs when needed, and much more. If your cash supply is seriously tight, think twice before getting into the landlord business.
There's a lot you can do to make sure you enjoy the best parts of being a landlord without being burdened by the worst. For introductory guidance, including help deciding whether a particular property will make a good and profitable rental, advice on preparing the property, screening tenants, understanding your legal rights and obligations, and more, see First-Time Landlord: Your Guide to Renting out a Single-Family Home, by Ilona Bray, Janet Portman, and Marcia Stewart (Nolo).
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