The Pros of Being a Landlord
On average, 65 percent of millionaires have three income streams, author Tom Corley reveals. Renting out property can be a great way to add another income stream without a lot of work. If you’re thinking of getting into the real estate market, here are the top advantages of becoming a landlord.
Additional Income Stream
Having another income stream is the main reason people choose to become landlords. How you use this extra income is up to you. Some people like to live on the extra money, perhaps while they return to school or explore passion projects. Others save all that extra money for retirement, a move that ensures they can maintain their standard of living in their golden years. What you do with the money is up to you, and that’s part of the advantage of being a landlord.
You can determine how much of the rental income you will be able to keep and how much you’ll need for property expenses and maintenance. At a minimum, you will need to cover the taxes, insurance, and mortgage. Many landlords like to set aside extra money every month in an emergency fund. This can provide a nice nest egg when repairs are needed.
While some people speak of rental income as passive income, it’s important to remember that there is work associated with it. You’ll need to find tenants, maintain the property, and make repairs. You can hire a property manager to help with this, but pay for their services with a cut of the rent money.
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Long-term Property Appreciation
As a general rule, real estate appreciates over the long haul. If you buy a property and hold onto it for ten or twenty years, you should be able to cash out with a healthy return on your investment.
The exact amount of long-term property appreciation depends on the property, the neighborhood, and how much work you put into it. If you make cosmetic improvements, such as a bathroom remodel, you can earn more money. If you do only necessary repairs, you should still earn a sizable amount when you sell.
If you’re looking at becoming a landlord for the long-term appreciation, search for single-family homes. These are more desirable among renters, so you’ll have an easier time finding tenants during the lifetime of your landlord duties.
For some people, the big appeal of being a landlord is putting sweat equity into the home. DIY property upgrades upon purchase and in between renters can keep the property looking its best. This means renting it out for top dollar. If you are the sort of person who likes home projects, you will enjoy doing the work and earning well from continued investments in the home’s value.
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