About · Press · Contact · Write For Us · Top Personal Finance Blogs
Featured In:

8 Issues with Buying Rental Property and Becoming a Landlord

By Angela Colley

house keys handDo you dream of owning property? Perhaps multiple investment properties from which to earn a monthly stream of income? Ah, the life…

But before you contact your real estate agent, consider what’s really involved. If you want to create an income immediately, you’ll need to rent your property. Though the proposition may sound simple, it is anything but. The information that follows details the downsides to property management.

It’s not meant to dissuade you from moving forward, but instead to show you that there are downsides as well as advantages to buying and managing rental property. Don’t let the potential to earn money cloud your vision when considering whether or not you’re cut out for it.

Issues with Becoming a Landlord

1. Start Up Capital

All potential landlords consider the cost of purchasing an investment property, but many overlook the costs to remodel. In other words, don’t expect start-up costs to end at the closing.

If you buy a damaged or out-of-date home, you could spend a significant amount to make it “rentable.” Any damage to the foundation, plumbing, or wiring can cost thousands of dollars to repair. But even if you buy a property in good condition, you may still have to make changes to get it up to code. This is because many states have strict requirements for rental properties that will need to be met before you start renting.

In addition to remodeling, being in compliance with these standards can significantly increase start-up costs. For example, let’s say you purchase a recently built duplex that was previously owner-occupied. Your state’s landlord and tenant laws require that you add safety features to the property before you advertise for tenants. A breakdown of the required changes is as follows:

  • Handrails installed along the front and back entrance: $1,300
  • Front and back doors replaced with secured, reinforced steel doorways: $300
  • Peep hole installed in front door: $50
  • Deadbolt entry installed on front and back doors: $50
  • Standard dividing wall replaced with a fire wall: $1,600
  • Completed code inspection: $35

Total Cost: $3,335

2. Making Repairs

When it comes to being a landlord, two things in life are inevitable: death and repairs. Don’t even consider a property management business unless you’re sure that you can pay for repairs. Landlord and tenant laws require that you make serious repairs quickly. If you don’t, you could be held liable for additional damages.

The thing about repairs is they creep up on you suddenly and often cost a lot. For example, if your tenant calls at 11:30 pm at night to tell you the water heater has busted and is flooding the house, you have to immediately send an emergency repairman to shut off the water and dry out the carpet.

Since it’s after hours, he’ll charge you $100 an hour for each of the two hours he is there. On top of that, you’re informed that you need to replace the water heater. Since this is a repair that needs to happen as soon as possible, you head to Sears and buy the most reasonably priced water heater you see. Not only do you have to pay for delivery and installation, but Sears won’t haul away your old, broken water heater. Luckily, your repair guy offers to remove it as long as you pay him his hourly rate and cover the dump fees.

Here is the total cost for this single repair:

  • Emergency repair (2 hours @ $100 per hour): $200
  • Cost to purchase a new 50 gallon water heater: $599
  • Cost of delivery and installation: $329 at Sears
  • Cost of removal and haul-away of the old water heater (2 hours @ the standard rate of $50): $100 + $50 dump fee = $150

Total Cost: $1,278

Major problems aren’t the only issues you’ll have to account for. Some tenants will call you for everything. Be prepared to spend your free time changing light bulbs, replacing air filters, weeding yards, and spraying squeaky hinges.

for rent sign house

3. Collecting Rent

You’ll have great tenants who pay the rent on time every month. You’ll have good tenants who slip up from time to time but always let you know ahead of time when to expect the rent. And then you’ll have the tenants that don’t pay and don’t call. As a landlord, you’re going to have to play bill collector from time to time.

Ask yourself if you’re comfortable confronting your tenants before you start renting. Keep in mind that you’ll have to make judgment calls as a landlord. For example, imagine you’ve had a tenant for six months and one month he doesn’t pay the rent. You don’t hear from him for a week. Finally, you decide to call and the tenant tells you he won’t be able to pay for another 7 days. You’ll have to make a choice to either let the tenant slide or to start the eviction process. Make sure you’re comfortable making this kind of decision and sticking to it.

4. Dealing with Problem Tenants

Most of your tenants will pay the rent, treat the property like their own, and keep the neighbors happy. But at some point, you’ll inevitably have a problem tenant.

As a property manager, I saw my fair share of problems. Once, I agreed to rent a property to three college students. By the second month, they stopped paying rent. My coworker and I went to the house to talk to them. When the door opened, I was greeted by a large pole coming out of the ground and extending to the ceiling. The tenants had installed a fireman’s pole in the house, complete with a hole in the first floor ceiling and a pile of concrete on the ground. The tenants promised to pay the rent and repair the damage from the pole. Not surprisingly, they didn’t.

The third month, I filed for an eviction. After the hearing, the tenants went back to the house and removed their stuff before the sheriff and I got there. When I went inside, I found graffiti on the wall, concrete in the toilets and sink, mold in the appliances, stains on the floors, and a bright, shiny fireman’s poll.

If you’re going to be a landlord, you’re going to have to handle tenants fighting with other tenants, tenants doing damage to your investment, and tenants who don’t pay. You’ll need to know the eviction laws in your state well, and be prepared to use them.

5. Surviving Evictions

Your state’s landlord and tenant laws make evictions seem pretty simple. To start one, you go to the local court, file a notice, schedule a court date, and show up on that date. The judge then tells the tenant to leave. The tenant heads straight back to your property, quickly packs up, and walks out the door. No harm, no foul, right?

In reality, evictions are often extremely costly and time consuming. Even if you evict your tenant successfully, you likely will have incurred major expenses and lost significant time in the process.

I’ve been through it before. Here’s an example scenario of how an eviction can work out:

  1. The tenant doesn’t pay his rent on the first.
  2. The fifth rolls around and the tenant still hasn’t paid, but you decide to wait five more days to try to avoid filing an eviction.
  3. The tenth comes and you still haven’t heard from the tenant. You go to the court, pay your fee (which ranges from $35 to $100 or more, depending on your state), and the court clerk tells you that the judge is backed up. They can’t schedule your hearing until next month.
  4. Once the court date rolls around, you’re out two months rent. The judge decides in your favor, but now you have to schedule a time with the sheriff to complete the eviction. That takes another five days.
  5. You show up with the sheriff on the 20th and find that the tenant left piles of stuff behind. According to the law in many states, you now have to rent a storage locker to hold the tenant’s belongings. That costs another $50. Now, if you were very lucky, you have a vacant apartment that needs cleaning and re-renting. Even at your luckiest, you’ll probably lose at least one month’s more rent while you look for a tenant. If you weren’t so lucky, the tenant caused some damages, which you will have to repair before you can rent the apartment again.

In the end, the break down looks something like this:

  • 4 months lost rent at $750: $3,000
  • Cost to file in court: $35
  • Cost to rent storage: $50
  • Cost to make repairs: $500

Total cost to evict the tenant: $3,585

house landlords newspaper

6. Managing Your Finances

Landlords need to look at property management as a rotating door. Tenants come in, stay their lease, and then go. While some tenants will renew a lease, most will move on to the next place when the lease is through and leave you with an empty apartment.

In down times, the apartment could sit empty for several months. To be a successful landlord, you’ll need to learn to manage your finances in times of feast and famine. Some months, you’ll have full occupancy, rent paid on time, and no repairs. You’ll have to be dedicated enough to save and not spend during those months because during other months, you’ll experience vacancies, late rent, and major repairs.

A landlord’s finances do not stay constant. If you can learn to go with the flow, and plan for the unexpected, you just might survive.

7. Keeping Your Property Safe

If a tenant is injured on a property that you own, there is a good chance you’ll be sued. Sure, you have homeowners insurance, but you always have the duty to keep your property properly maintained and in good working order so as to avoid contributing to potential mishaps. By keeping your units safe, no matter what it takes, you greatly decrease your chance of trouble in this area.

In order to prevent problems, you’ll need to know the building and safety codes in your area and follow them by attending to regular maintenance and checking on your properties periodically. It may take a lot of work, but can save you a costly legal battle later on.

8. Paying Taxes

One thing you can’t overlook is taxes. Renting property is your business and so you’ll have to report the income you earn when you file your taxes every year. But one tax commonly overlooked is property tax. If you own the home you live in plus one rental house, your property tax bill could be double what you were paying before you purchased the rental. Make sure you understand the effect taxes will have on your bottom line and that you are prepared to pay them.

There are some ways in which taxes can work to a property owner’s advantage, particularly in a down housing market. Consider, for example, if you need to sell your home, but can’t recoup what you paid for it. If you sell it as your primary home, you can’t claim the loss on your taxes. However, if you turn it into a rental property first, you may be able to claim the loss as a business loss against any rental income received or your ordinary income. This can decrease your tax bill by thousands of dollars, especially if you claim a large loss and have a high income.

Final Word

Buying rental properties is a great way to make money. Just remember that being a landlord is not all fun and games. You’ll work hard for your money and may be faced with adversity from time to time. Buying rental property is not for everyone. It should be an investment option you consider only once you’ve achieved a certain level of financial independence.

Not only can start-up and ongoing repair costs be significant, but you’ll want to invest a substantial down payment in order to get the best loan terms and minimize your monthly mortgage payment. That said, be aware that in a down housing market, you could lose money on your investment and become upside down on your mortgage. Still, buying rental properties can be a great way to supplement your income, or even replace your current one.

Do you own rental property? What have you learned from the experience?

(photo credit: Shutterstock)

Angela Colley
Angela Colley is a freelance writer living in New Orleans, Louisiana with a background in mortgage and real estate. Her interests include animal rights advocacy, green living, mob movies and finding the best deal on everything. She blames her extreme passion for never paying full price on two parents that taught her that a penny saved is two pennies if invested wisely.

Related Articles

  • gina

    I have always wanted to give owning rental property a try. I have been too afraid of the pitfalls, mainly not being able to rent for a long stretch of time. I have seen several of my friends and family have to deal with this–it can really cut into any profits, and cause a good thing to become a nightmare!

  • http://madsaver.com Mac

    I too have long been interested in renting out property. And if I had the money, now would be the time to get into it with the home prices being somewhat affordable. However, getting tenants to stay & pay may be difficult. Especially since my idea is to buy some very cheap Detriot homes and rent those out…but I’m not sure how feasible that is.

    • novice_Jay

      section 8

  • Winston C

    My mom owns a renting property and it is driving her crazy. The first problem is that she doesn’t live nearby the apartment, so that makes the management of the property even more difficult. Her tenants rarely pay rents on time. There are always small repairs that need to be done. Well, she is thinking about selling it when the market gets better.

  • http://moneycrashers.com Chris

    It is definitely difficult to decide if buying a rental property is the right move. While it can be scary and risky, if done properly, success is possible. I guess the point is this: every investor has to weigh the pros and cons before becoming a landlord.

  • Karmella

    I think I’d only want to do so if I had enough units to make it financially sensible to hire a management company and to spread out the risk of losing a tenant and the corresponding income.

  • http://moneycrashers.com Chris

    @Karmella – Great point. Hiring a management company makes the entire process much easier. That being said, it can bite into your profits – as you noted.

  • Elizabeth I

    One way to deal with tenants regarding minor issues it to put a $50 clause in the lease–any repair under $50 the tenant must cover, this would include changing light bulbs, etc.

  • Elizabeth I

    Doing a thorough credit checking and finding a tenant with excellent references is a great way to ensure you are paid on time. I have had two tenants and have never had late rent.

  • Elizabeth I

    Having a management company can mean that you will be unable to deduct a loss on your tax return and often rental real estate creates a loss. This is why rental real estate can be so attractive.

    A better approach is to find a company to “rep” the property, find the tenants and write the lease. They usually charge one months rent for this service, but you will be able to deduct the loss (if it is applicable tax wise)

  • Pingback: 5 Reasons You Should Only Pay Cash For Rental Properties

  • rod

    I have owned rental property for some time. I was lucky to sell my properties before the market went south. I have some advice for those thinking about gettting into the business. One have lots of cash. You will needed it. Pay cash for the properties. If you do not have cash you cannot afford to play this game. Period. Two it works out best if you do not need to work a 40 hr job.Nothing like working all day and spending your time off repairing somebodys elses problem.(for free) Rental property is a good way to stor cash. The money is made when you buy or sell the property. One does not always make money when selling the house either.. Just like the rent does not always get paid. Nothing like working a 40 hr job and taking your pay to pay housepayment of a house you don’t even live in. If you have lots a cash and want spend it…treat yourself to new car, a trip, anything but old rental house.

    • novice_Jay

      why cant one afford to “play this game “unless they have lots of cash ?
      Interests rates are beyond low and property sales where I am are very low.
      Many of the properties I am looking at mortgage +ins.+hoa’s + taxes = about 50% of the current rental market….am I missing something ?

    • http://twitter.com/MichealKennedy Mike Kennedy

      “If you have lots a cash and want spend it…treat yourself to new car, a trip, anything but old rental house.”

      Horrible advice. Those things are a waste of money, and won’t bring any kind of financial reword whatsoever, ever. Even an old fixer-upper could still bring in profit, and you’d still build equity.

  • Bob

    Real estate is a funny thing. One year I cleared $500,000. Two hundred thousand became tax preferred, and I plowed $125,000 right back into another rental which I converted to a personal residence. Right now, I have very little cash but clear about $42,000 a year in rents. I own 7 rentals plus my residence. I have had nitpickers, deadbeats, etc. My policy is to evict the deadbeats and immediately. My tenants have left behind junk and fleas, have broken things including garage doors, etc. Through it all I never blink. I simply adjust rental rates accordingly and continue. This is a long term gain akin to watching paint dry. Patience is rewarded and you must accept a lifelong commitment. I do not flip properties. Although it’s possible the tax situation can be tricky and it’s not a sure thing. In fact, nothing is sure in real estate but patience and the next group of nitpickers who try to nickel and dime you to a death, or the next deadbeats who have have good credit but feel you owe them something. Ninety percent of all tenants are decent. It’s that 10% you work to eliminate and survive.

  • Deanna

    Thanks Bob, great advice! We bought our first rent house 10 years ago for $16,000. I had a hard time talking my husband into it. If you’re married, you need to be in agreement about this or it can ruin a marriage. That 1 house was a rough start but it gave us a good taste of what it’s like. We have since seller-financed that 1st house to the tenants and we have bought 4 more. We are not planning to buy any more because of the increased government control. We’re in south Louisiana, and since hurricane Katrina it is getting harder to afford insurance and all the governmental hoops that have to jumped through. We do plan to keep the ones that we do own now. It does take a lot of patience and our rental agreement continues to grow and change with each new experience. I am struggling with learning how to eliminate the deadbeats. I have found that the nitpickers tend to go away when I refuse to answer to their every whim. For me it comes down to the fact that I love owning property that other people are buying for me. And the people that rent from us need a place to live. As long as we have a mutual, professional respect for each other, it works. I have no unrealistic expectations of getting rich from this investment. But I do look forward to my husband being able to retire from his job in 8 years when 3 of our 5 houses will be paid for.

    • Guest

      ” I am struggling with learning how to eliminate the deadbeats. ” Usually people with good credit scores make good tenants.

    • Davis

      Charge 1st month, last month, and a one-month security deposit up front. This eliminates people living check-to-check and ensure that, in the event you don’t get rent on time or something is damaged, you are covered for the two months it takes to evict and fill the unit with a new tenant.

  • Liz

    I am considering purchasing a rental property in Orlando. I’m in my 20′s and don’t have unlimited funds, but believe putting some savings towards a down payment may result in better returns than keeping it in the stock market (do people agree/disagree?). I’m looking for a property 100K or less (which does exist due to the housing crisis) that will rent for at least 1K/month. Other than location and condition, what do people suggest I keep in mind while looking at properties? Thanks in advance!

    • KMN2planker02

      both are high risk, high return investments with pluses and minuses on both sides. You have to keep in mind that for either them, its a long term investment. If you are looking to turn a profit in the short term, neither is the way to go. For rental property you must look over the laws regarding rentals, have a screening process, see what the estimated cost is for upkeep etc…aim for something that is going to be low maintenance. Also, before you even dive into this, make sure you have around 6 months of expenses covered and sitting in your bank account because you dont want to find yourself up Sh*tscreek without a paddle, a life jacket, and a flare gun.

  • Anonymous

    I just bought a property with a partner…He provided the majority of the capital in return the mortgage went in my name (he already has a couple of properties under his name). We bought a great house and all is well. I think too many people are discouraged because they worry about the risks but do not evaluate the benefits. Granted I live in Canada in a city with a growing real estate market.

  • Cosmo

    No pics of the Fireman Pole?

  • http://www.pogotips4u.com/ Pogo Dave

    I rented my house in Sheffield, UK, for 18 months while away travelling. It took just a little time to find a local estate agent who basically did everything for me. They found the tenants, set-up legal contracts and looked after rent collection and any maintenance issues that came up while I was away. That cost me 15% plus the cost of some repairs which they took out of the rent before paying it over.
    I more than covered the cost of the mortgage and the whole process was entirely painless – perhaps I just got lucky with this one-off deal.

  • Adrian M.

    and why don’t you hire a manager that handles all that stuff? your income will be less but you will have peace of mind and much time free!!

  • http://www.manhattancalumet.com/ Dennis The Menace

    Its funny I don”t know a whole lot about income property but in the post above you stated that in order to rent a apartment out your building must be up to code. I just happened to be thinking about this the other day I did not think a whole lot about it. But when you buy income property your building must be inspected by the town or city you reside in before you can rent out a empty apartment. Very good point. I believe that real estate is a fairly complex investment and it takes much time and effort to stay on top of things and this varies from property to property so thats really a good thing to take into consideration when buying a income property..

  • landlord

    my advice:
    -do not get involved unless you are good with your hands or know someone who is and will work for a reasonable price.
    -do not get involved unless you LOVE operating your own business.
    -spend a lot of time on preparing your leases and on landlord tax books. having this knowledge will save you thousands down the line.
    -be friendly but fair with your tenants. file an eviction order with the court every time they are late. they will get the message that you are a professional and start paying on time.
    -do your best to pay off your properties in full. carrying a mortgage when units are vacant can be a financial burden.
    I own 3 properties……….it is the best business move I have ever made…………..it may not be for everybody, but I love it.

  • http://twitter.com/RentingWell Renting Well

    Great article – particularly the part about keeping your property safe and managing your finances.

  • http://profile.yahoo.com/SZUQZDVAII7LQKT4CSTABHCKNM B H

    My first question is, do you own rental properties Angela?

    If I didnt already own rental proprties, I think this article would make me have second thoughts. If you are interested in a rental property business, do your own research and talk to people who are currently doing it. Looks for properties that do not need a lot of work. All the examples above are extreme and do not happen if you are patient and do your resarch.

    Owning any business is not all fun and games as the writer mentions above. Any business has the potential to loose money and be sued by customers and vendors, but if you allow fear of what could happen to stop you, where would you be today?

    My opinion is that the goal of rentals is cash-flow and not necessarily growing the value of the property, because focusing on a value growth strategy is flawed. We need cash to live month to month, not growth.

  • RN

    Bah. I have several rentals and as long as you appropriately screen tenants you will have limited trouble. Where landlords get into trouble is when they are desperate for tenants.

  • http://www.renthomefl.com/ Monique Day

    The issues you’ve brought up clearly show that the responsibilities of a landlord are time consuming and difficult, not to mention costly. However, one cost can make things easier. A rental property management company can take over these duties.

    • xxxx xxxxx

      no it’s not. you see, if there is a problem to fix, you will shop around to save yourself money. That may mean even 1000$ in some cases. They won’t, they will take care of it and give you a bill to pay. When I wanted to extend one wall I had someone quoting me 1000$ for his labor. I had found someone then who charged me 15$/hr. He was skilled, but recovery addict, he was clean and needed work. He did a great job fixing many things I wanted to be done, putting tiles and fast. Extending of this wall costed me maybe about 60$ in labor.

  • Boise Mcs

    Hi,
    I enjoyed reading your article. I’d like your advice on a couple of things…
    I’m finishing up my MSc in the state of Vermont and within the next 2 years am hoping to go to England for my Doctorate. I’m interested in purchasing a forclosure (and am currently looking at states in the North-east) as a rental income property. Because I won’t be living in the area, I want to find a property management company that will take care of rent, damage control and whatever else pops up. Is this a realistic expectation from a property management firm, and if so, what should I expect them to charge me? I’ve heard between 10 and 20 %.

    My goal with this idea is to generate a monthly income while I’m pursuing my degree, and, also to invest in something, which, in the long run will turn into profit.

    I appreciate any and all advice!
    Thanks.

  • http://www.viproperties.com/ Vision Investment Properties

    If you really want to have an investment property, but aren’t keen on all the factors or issues that go into being a landlord, you can still do so with the help of a real estate investment firm. There are firms out there that will help income property investors find the right property, will make sure the tenants are there, will manage the property for the life of the investment, and will even assure rental income for a given period of time. This is our primary service offering and investors are discovering the real benefit of adding these income properties to their portfolios.

  • Kelly

    What is your opinion on buying rental property out of state? We live in California and would like to buy rental property in Texas. We hear Texas law is pro-landlord. Do you know if this is correct?

  • Kelly

    What is your opinion on buying rental property out of state? We live in California and would like to buy rental property in Texas. We hear Texas law is pro-landlord. Do you know if this is correct?

  • Cicten

    Angela, I am a investor and have a number of properties. You point out all the problems of which few I have ever experienced to the degree you have mentioned. I am from Austin, Texas, the market is hot and people are on a waiting list if a property becomes available. The principles are fairly simply and straight foward. Management is key, don’t spend all your profits, maintain an operating fund, keep to the contract and deal immediately with people who don’t observe the contract, maintain accurate records. Universally, rent is no less than 1% of the property value. For example a duplex costing $150K should recieve $1,500 monthly in rent. If you violate that rule, you will not stay in business very long. Now for real figures, you will be collecting about 12% per year of your investment, after taxes you will keep 10% of the value of your property. So if the property is paid for ($150K… you will have around $15K annually after taxes for investment. Here is the real kicker that is not mentioned. You depreciate the property gaining a REDUCTION IN TAXES. Any cost to maintain the rental property is DEDUCTED from your taxes. And in inflationary seasons, you could see remarkable increases in the value of your property. My cousin in California bought a house for $84K and within 8 years sold the property for $500K. This shouldn’t be expected from every property, but the gains in property value could move a $150K property into the $200K value. So Angela, you failed to really talk about why people like me invest in rental property. I hope you will give a full picure in your next article.

    • 7

      “Universally, rent is no less than 1% of the property value.” I have a million dollar, 7,000 square foot home for rent. I should be charging $10,000 a month?

    • Landlord:)

      YOu see in Vancouver houses are minimum 500-700K but rent for one full house is about 2000-2500. So that’s what it is and still worth it for me because I had always 20% downpayment. so works out just paying for mortgage for my two houses and all the expenses then I have almost nothing left I mean for right now. But I made a lot of money already for my houses going up in value and for paying of the mortgage. I started with 80K I’m at about 300-350K now and obviously still going up and that’s 5 years. I don’t see many of my friends saving in assets or anyway additional 50k per year after taxes having regular lifestyle.

  • Davis

    I have rental property and agree with the posts below: being a landlord is as difficult as you make it. If you schedule maintenance and make repairs at the first sign of wear, there is no need to fear of emergency circumstances. When the lease is drawn up, include a $/day late fee (I charge $5 per day) and your tenants will be eager to pay on time (or early)! Also, charge first month, last month, and one month security deposit. This way if damage is done or they stop paying rent on time, start the eviction process and by the time this two months of “no rent” finishes, you have 2 months reserved because of the deposit and last month’s rent you collected up front. It also proves that they are financially stable enough to save 3+ months rent and should have a steady income to have done so. I bought my first home at 24 years old and put $10 K into the over-detached-garage apartment. I have not made a single mortgage payment since I closed on the house because my garage apartment covers the entire thing. Just turned 26 and about to buy my second property. This venture, if done properly, will retire you faster than a $1 million 401K!

  • Biff

    I am a fireman and many of my coworkers are Landlords as well due to our schedule and the fact that many firemen are also handy. Every single one of them that I’ve talked to highly recommend it. They purchase the properties, paint and renovate with inexpensive materials but make the units clean and fresh looking and attract good tenants. Many of them go year(s) without having to even visit their properties. Yes, there is an occasional headache but you plan for them. I am currently saving for my first rental property and am not discouraged by this article.

  • http://www.omarbuyshouses.com/ we buy houses cash

    What I actually found from my sample
    is most of these companies aren’t cash buyers. They don’t tell you that, but
    when I looked into them I found the connections from their cash buyer website
    to their assignment wholesale offers. So what does this mean to you?

  • Mike Maurer

    This article was obviously written by somebody who knows nothing about being a landlord. $1278 for a new water heater, that is absurd! I replaced a water heater a few months ago. $329 at home depot, and if you ask for a 10% coupon at the front door they’ll usually give it to you. I paid my maintenance guy $75 to pick it up and install it, and he took the old one to the recycling center and got $10 more. If you’re not too savvy on getting things done for cheap then being a landlord isn’t for you. You have to know a few people that can do the job right and give you a fair price, which can be done through networking. I have several rental properties, and I love making money in real estate, I recommend that you do not listen to any acticles that say real estate investing is a negative thing. It’s the best thing you can do for yourself, if you think you are the kind of person that likes to make money.

    • H

      He also said it flooded the carpets and so on. Don’t forget the time of day when this happened. Sure a water heater might only be $300 but all the damage control and not to mention hotel for tenants could be way up there.

    • Nicole

      I live in San Francisco, I guarantee it would cost at least $1200 to replace in a more expensive city. I had 2 pieces of property in Arizona and I agree with everything this article says, you need to be liquid to be able to float issues. In one month my renters said the fridge stopped working. I had it repaired within 24 hours. They didn’t pay rent on the 1st and by the 3rd a relative dropped off the keys. When I got back to the house they had punched holes in 2 of the doors and one of the walls, they vandalized the back yard and a dog pulled up several 12×12 inch holes in the carpet (they didnt have a dog when they moved in 3 months prior, or the month prior when I stopped by to get rent). These tenants only lived there 3 months and it cost me well over $1000 to repair, a month lost rent from them plus a month lost rent while i fixed it back up and the fridge was $250. So yeah, in just over 1 month I lost more than $3500. It can be a gamble. I now live out of state and have a GOOD property mgmt company look after my 1 piece of property. I don’t make as much but I rest much easier at night.

  • Sylwia VanLandlord

    Hi there,

    To make sure you don’t get deadbeat tenants

    What I do is making sure that they:

    - own a car. It shows they are responsible enough to make insurance payments, it shows that it will be easier for them to go to work, keep a job or find faster a new job because they don’t have to depend on accessibility; it shows they have a drive. All people without a car that I know even some of my girlfriends are deadbeats or people with bunch of issues.

    - worked at their job at least 6 months and are in good standing

    - I also ask in my rental application how much they make per month after taxes and during the reference check confirming it with their manager. Very curtail, I had full time supervisors that made 2000$ per month. How can you effort 1150$ per month from that seriously?

    - also reason for leaving the old place. If they’re complaining about the old landlord I don’t take them, you don’t need complainers and someone else’s problems but if they need a bigger place or closer to work then I consider them.

    - I also ask how long the couple was together, if they are fresh together waist of time, they will break up tomorrow and one person won’t be able to have enough money or they will need a smaller place. If they were long time than yes.

    and always make sure to check references, don’t be lazy. People lie in their applications so better do your homework now to later just be picking up the rent on the first.

    when potential tenants are interested and filling up rental application just ask them additionally “Are you sure you are able to handle the rent amount and it will be ready for me on the 1st of every month?” Make sure to execute that. Every 1st of the month whether you are tired or not, you are getting in your car and picking up the rent from your tenants. Make sure to text them a day before the 1st asking them what time they will be home tomorrow. There is no questions do you have a rent, there is only one question, what time is good for you tomorrow.
    Oh and cut down the convos with tenants to social minimum, because if you become friends they will want to slack on rent, that’s why they are so friendly but be professional and respectful. And fix stuff if they need to be fixed, ultimately you are fixing your own house only someone lives there.

    Oh and someone mentioned something about 2 months rent at the front. Good idea but there are drug dealers out there and people doing criminal activities with lots of cash, so just make sure they actually made that money legally, check job references.

  • HC

    I’m on the verge of buying my first investment property (in TX). Is it recommended to create an LLC and put the home as an asset of the LLC? Good for liability reasons?

    Also, the goal is to pay off the mortgage as quickly as possible, correct? Is it better to have a shorter loan (10yr) and try and put extra each month toward the principal… or something longer, like a 15yr+, and put extra each month?

  • Jay T. – Minneapolis, Minneso

    This article is absolute rubbish. I have had many water heaters replaced an it has never cost me more than $700 per, delivery and disposal included. I have owned rental properties for over 20 years and have only had one bad tenant (I inherited him when I purchased the property) and I have never had to evict anyone. I can count the numer of times I have had a layer than 5 days late rent payment on one hand. The key to successful landlording is keeping your property in tip top condition to be able to ask a higher than average rent and attract the best renters and screening, screening, screening prospective tenants. Meaning criminal history, credit checks to make sure they have a history of paying their bills on time, checking for any evictions, income minimum, and verifying employment and rental history. If you do that, you and your tentants will be happy. Our paid in full duplex pays for my sons college expenses, will then pay for my ddaughter’s, and will pay off our existing home mortgage in 6 more years. Run, don’t walk to buy your first rental property!

The content on Money Crashers is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. References to products, offers, and rates from third party sites often change. While we do our best to keep these updated, numbers stated on this site may differ from actual numbers.
Advertising Disclosure: We may have financial relationships with some of the companies mentioned on this website. Among other things, we may receive free products, services, and/or monetary compensation in exchange for featured placement of sponsored products or services. We strive to write accurate and genuine reviews and articles, and all views and opinions expressed are solely those of the authors.
Links monetized by VigLink
Close