Here's a quick story: We have a client who has rented her condo unit for the last few years. A few months ago, she called us saying that she is looking to re-list for rent because her tenant has stopped paying rent. Once the tenant moved out, our team conducted a walkthrough to assess what kind of "fluffing" the unit would need before we go to list.
And boy oh boy, did it need some fluff. The tenant left the unit in abysmal condition: carpets stained and ruined, paint peeling off the walls, broken light fixtures... we could go on. All in all, for a unit pulling less than $2K in rent a month, the owner is paying over FIVE THOUSAND DOLLARS to undo all of the last tenant's damage.
Sounds like a nightmare, right? Just another day in the life of a landlord.
The idea of being a landlord and receiving "passive income" has been regurgitated over and over by these "hustling" Instagram influencers. Don't get me wrong, the idea of receiving monthly checks for doing nothing sounds amazing, but that's not what being a landlord is about. It is a lot of work. Being a landlord is not a "passive income hustle". It is a serious business that comes with risk and reward. You have to be prepared for all the unexpected expenses that come with homeownership, including things breaking, roofs leaking and routine maintenance. And sometimes, these expenses can come up on both of your properties at the same time. Also, remember that even if you have tenants in the property, you as the owner of the home are still responsible for the mortgage. So, if you find yourself in a situation like our clients where your tenants stop paying rent, guess who has two mortgages? You.
Given the state of the current market, we have a lot of would-be sellers pondering the idea of keeping their condos and townhomes and turning them into investment properties with tenants. Honestly, I am a landlord and have been for years. I bought my first condo with the intent of renting it out in the future. I understood that a condo was the best bet for me given there was a limit on the amount of things that "could go wrong". But I just got a call on Saturday that my toilet is leaking into the unit below and will cost me the toilet replacement and repair to the lower unit ceiling. Far more manageable than a roof replacement on a non condo investment. I also knew my monthly payment is manageable around $1500/month if I go a month or 2 without a tenant OR if a tenant stops paying their rent and I have to cover it during the investment process.
I would feel much differently if I was looking at a potential $3000/month carrying cost on a larger home. In the past two weeks, we have heard updates from two separate clients on their struggles to get their tenants to pay rent. And another realtor at our brokerage emailed the company asking for a recommendation for an eviction attorney for their client. Talk about a headache!
This is not meant to scare you into not pursuing investment properties. Speaking as a landlord myself, it is an awesome way to expand your financial portfolio and hold onto an appreciating asset. That being said, you have to know the risks and know that it's not as glamorous as you might think. Thinking about becoming a landlord? As a Realtor and a landlord, I happily engage my clients in a discussion about turning their property into a rental, going through the process as well as highlighting the risks and rewards. And we can help you too! Schedule a chat with our team today and we can help you decide whether to sell or rent your property.
'Til Next Time,
Jillian
Every month Jillian Keck Hogan shares local real estate insight, advice, and more. To learn more about Jillian and her team, visit jillianhoganhomes.com and follow her real estate group on Instagram @jillianhoganhomes. Equal Housing Opportunity.
