If you can invest in real estate, it’s one of the best methods for growing your net worth. And, if you do it right, you can even make a passive income and hire others to do a lot of the upkeep for you. But, there are many ways to get into the real estate game, and not every option works well for everyone.
One of the more common types of real estate investing is owning homes or rental units that you lease out to tenants. You make money as they pay rent. Over time, this covers the costs of the property and more.
When looking to purchase properties, one thing to consider is whether or not becoming a landlord is a good bet. Generally, there are pros and cons to renting out homes or apartment units.
The Pros Of Being A Landlord
If you’re considering becoming a landlord, here are four benefits:
- Real estate is generally a sound investment: While you’ll need to research and be cautious, real estate is often one of the safer investment strategies, especially if you do it right.
- It can help you diversify: If you already have other investments, including real estate, you can diversify your portfolio by owning rental units.
- There are tax benefits: While the exact benefits and deductions vary, owning property is often great when it comes to tax season.
- You can be your own boss: Being your own boss can be a great thing for some, but it doesn’t work for everyone. However, it’s an excellent option if you prefer to be self-employed.
While these aren’t the only four reasons to become a landlord, they are some of the main benefits to consider.
The Cons Of Being A Landlord
Yes, there are many benefits to renting out homes or apartments, but there are some cons, too.
- All of the upkeep: If you’re a landlord, you’re in charge of maintenance and repairs. You own the property, after all. This upkeep takes a lot of time. It’s often worth it to have a property manager handle these aspects for you, but you’ll have to balance your time with your budget.
- You’re at the mercy of the market: At times, you’ll be able to make a good return on your investments, but if rental and real estate costs go down, you may lose money, as you’ll need to lower rent to be competitive.
- It takes a good deal of business savvy: While owning property has many advantages, it’s not for everyone. You may not have the financial situation to get started, or you might not know about the industry yet. It’s essential to be realistic.
- The issue of tenants: While there are many great renters out there, it’s all unfortunately true that some of them cause problems. You’ll have times you deal with people who don’t pay on time, break the rules, or even break the law. So, ensure you’re ready for this.
If the cons outweigh the pros, becoming a landlord probably isn’t right for you.
To Rent Or Not To Rent
Suppose you’re in a good financial position to invest in property or already own an extra property you’re considering renting out. In that case, it’s a good bet to get into rentals. While you’ll want to consult with financial experts, it’s generally a smart way to make money. With renting, you can get income on a more regular basis while also increasing your long-term investment portfolio.