Being a landlord runs in my family, but I'm convinced it's not for me
My mom has managed several rental properties for my whole life, and her mother did the same thing.
My other grandmother, on my father's side, was also a landlord for many years.
But I can't say that I plan to follow in their footsteps.
I've seen firsthand how much work goes into it, and I'm convinced that this "passive source of income" is much more active than it sounds.
Here's why:
You're always on call.
It was great having my mom around to pick me up from school every day - having an additional source of income made it possible for her to freelance, rather than working full time.
But there were plenty of times that I went down for breakfast only to find that she'd been up for hours, making emergency calls to plumbers because the hot water wasn't working in one of the houses.
Being a landlord means that if something goes wrong, it's up to you to fix it, and you're the one who gets the panicked phone call in the middle of the night.
Of course, you could always hire a property management company to handle problems that come up. But that cuts into your profits, which are tight as it is, because...
There are lots of costs that people don't think about.
It seems like an easy equation: If your renters pay more than your mortgage costs each month, you'll make money. But chances are, there will be a lawn to mow, snow to plow, and gutters to clean ... not to mention the occasional unexpected expenses that pop up when a dishwasher stops working or the roof needs repair.
If you have the time and the interest, you can save money by doing repairs and yard work yourself, but eventually you'll run into a situation that requires calling a professional.
On top of that, your property taxes may go up unexpectedly if other houses in the area start selling for higher prices, or if the city decides to reevaluate how much they're taxing homeowners.
Over the past ten years, my mom has repeatedly faced the same dilemma: wanting to keep great tenants who can't afford to pay more, but needing to raise the rent in order to break even.
Finding the right tenants isn't always easy.
Depending on where you're located, finding stable long-term renters can be difficult. In my mom's area of Newport, Rhode Island, there's a huge demand for summer rentals, which can be very lucrative but mean that no rental income is coming in for nine months out of the year. There are also plenty of college students looking for off-campus housing, but that means potentially dealing with damage to the house and calls from angry neighbors if they decide to have a party.
Even if you're in an area where there's a huge supply of working professionals, sifting through the calls and emails from prospective tenants and arranging time for the showings is still a lot of work. Yes, you can outsource it to a realtor, but that cuts even further into your profit margin.
And chances are, you'll want to be involved in choosing a renter, even if that means picking between two pre-screened candidates. After all, you're about to hand over the keys to what is probably one of the most expensive things that you own. Finding someone who is going to be reliable, trustworthy, and pay rent on time is crucial.
Knowing all of this, I've come to a sad (but true) conclusion: I'm too lazy to be a landlord. Although there's no question that I'd love to have an additional source of income every month, owning a rental property doesn't mean that money will just magically appear in your bank account every month. With the work that's involved, it's more like having a second job. And if I'm going to do that, I'd rather find an easier one.