©2007-2009 Chris Compton
I’m often asked by potential clients questions like’ “Don’t I have to worry about renters destroying my home?” What they are really looking for is reasons to become a landlord despite the horror stories they have heard. In this article I am going to give you five great reasons to become a landlord.
Until recently, if when you heard the word “landlord” you thought of a cigar chomping inner city slumlord tough guy, or a corporate bigwig sitting high in an office tower counting his money, I couldn’t find tremendous fault with your imaginings. The real estate roller coaster ride our country has been on for the last decade has changed everything in the rental arena, though, and today’s landlord is far more likely to be an involuntary participant, at least at first.
She needed or really wanted to move and was unwilling to sell her home at the price dictated by today’s market. She sees the landlord option as a slightly unpleasant means to an end. For the most part, she has been pleasantly surprised.
Five Great Reasons to Become a Landlord
The biggest reason to rent your home out to a perfect stranger is the primary factor in most business decisions you make. Renting your home provides a source of income. While it is true that rent does not always exceed expenses, the expenses exist whether the rent is coming in or not. The rent is definitely an income source. For owners fortunate enough to own their home without the encumbrance of a mortgage, this rental income drops to the bottom line quickly and with only minor resistance. (In fact, buying a home for cash and renting it out can bring returns far higher than putting the same money in a bank, credit union, or other financial instrument, but that’s a subject for another day.) Even owners unable to collect enough rent to totally offset expenses from mortgage payments, taxes, insurance, homeowner’s association dues and maintenance can probably get close enough to be able to afford housing in a more desirable location.
An often overlooked benefit of being a landlord is the security provided by the tenant. The vast majority of homes victimized by vandals are vacant. Insurance companies charge much higher premiums and limit coverage for vacant homes. Many insurers will not cover a vacant home at all, citing loss rates that are unacceptable. When I was a high school junior, my family moved from northeastern North Carolina to Hopewell, Virginia. For the first two years there we lived in a home we called “the Mansion on the River.” Our rent was reasonable (zero), and the home was enormous and beautiful and right on the Appomattox River. The house was for sale and the owner was concerned with vandalism. Having a responsible family in place was a tremendous benefit from his perspective.
Most families cannot afford the luxury of owning multiple homes without the offsetting income a tenant provides. When we find ourselves in the position of owning a home one place and needing to live somewhere else, something has to give. A good tenant is often the key factor in allowing a family to take the next step in life’s journey, a step that just could not be taken otherwise without serious ramifications.
Owning rental property can be advantageous at tax time. Rental income must be reported, of course, but owners may deduct mortgage interest, repair costs and depreciation for starters. Have property in another state? The annual trip to check on it could be a tax deduction. Please don’t take my word for it, however! The IRS is a serious group and you should consult an expert about what they will and won’t allow.
Probably the least talked about advantage to becoming a landlord is one you would never suspect existed and may not believe. Trust me on this, though. I am an expert. Good tenants frequently improve your property during their tenancy! Really. Good tenants, especially long term tenants are a pleasure. They paint, they landscape, they put up storage buildings and fences, they maintain systems and make repairs, all while paying the rent. Good long term tenants rent your home, take care of it, pay for it and increase its value!
I know I promised 5 reasons, but I always try to under promise and over deliver. Here is a bonus reason that you may not have considered. Many landlords get to know their tenant families and often they make an impact in one another’s lives. This may sound hokey, but when you open your home to another family, even for money, you are exhibiting a trust in them. That trust, properly nurtured, often grows into respect, friendship and sometimes love. Being a benefactor can deliver a peace unobtainable in any other manner. Connecting with our fellow human beings is a tremendous experience and one we can’t possibly get often enough.
So with all of these benefits, what about the horror stories? We’ll talk about them in a future article, my friends. Until then, if you have any questions concerning property management, landlord/tenant issues, general real estate concerns or just need the best possible team managing your North Georgia Property, call me personally at 770-682-7735.
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