Pros and Cons of Owning Rental Property

What's in store for you? How easy is it to be a landlord? What problems are you going to face? Is it a profitable business model?

Let's take a look at some of the pros and cons of owning rental property to answer your questions.

Advantages of Being A Landlord

You own property, an asset that can be sold, borrowed, and essentially increases your net worth.

Income - Rental properties generally offer an income. Depending on the property and its location, the income will vary. In Florida, it varies between cities, as seen here. And it's essentially passive income. You may be required to maintain the home. However, the monthly rental payments generally cover that labor and more.

Homes tend to increase in value. This means that as you own the property, it will appreciate or become more valuable. It s not guaranteed, however. As the property increases, you can increase rent depending on your tenants' goals. RocketMortgage states that the current national average appreciation rate is 2% per month or 14.5% per year.

There are definite tax advantages to owning rental properties. First, your rental income may be tax-free if you do not receive net cash flow after deducting expenses.

And you can refinance your loan if interest rates fall and your property appreciates. This is tax-free. Or, if you sell the property and reinvest in another property, the profits can be tax-free. ITs called a tax-free exchange.
You also have the satisfaction of working for yourself if you own several properties. This can be your full-time job, and it generally doesn't require full-time hours. This can be a massive advantage to being a landlord.

Disadvantages Of Being A Landlord

Properties don't always increase, and you may end up breaking even.
There is also the problem of finding tenants or dealing with problematic tenants.

Liability problems. Being a landlord means being responsible for what happens in the home. If someone gets hurt, they may decide to sue you. Insurance can be costly, and liability can be stressful. It s your responsibility to make sure your rental home is up to code and safe for living.

Unexpected expenses and repairs. Homes need repairs; it's a fact of life and homeownership. And generally, those repairs cost more than we expect and happen at the worst times. Being prepared for unexpected expenses and repairs with a savings account can mitigate this disadvantage.

Investopedia haș broken down some more cons to being a landlord here. Don't let this sway your decision, though. With hard work comes reward!

Owning a rental property is full of ups and downs. Deciding if it is the right choice for you requires weighing the pros and cons. Consider talking with other landlords and rental property owners before making a decision. To your success!