Have you been looking for a way to make more money? While finding a better job is one option, having another source of income or a side investment is another viable course.
If you’re trying to make more money or invest in a long-term financial solution, you’ve probably considered buying property. Real estate is an often discussed way to make passive income, and there are various ways to turn real estate into a money-making venture.
One of the more common, especially for people just getting into real estate investing, is renting out rental units or homes. While commercial real estate investments, including buying a large apartment complex, may be out of most people’s budgets, buying a townhome or small house is much more feasible.
However, you may wonder if becoming a landlord is a wise financial move. As with most investments, renting out property to tenants has risks and rewards.
The Benefits Of Becoming A Landlord
One of the primary benefits of becoming a landlord is that you can make extra income. While passive income has become a buzzword, making money each month on your rental properties is possible. Over time, you could make a great return on your investment, especially if you’re in an area where rental costs are high and units are in demand.
Secondly, being a landlord is an excellent way to make money while being your own boss. After COVID-19, many people are looking for flexibility in their work. As a landlord, you’ll have a lot of say over your hours and how much time you put in.
You can also yield benefits with less work if you partner with a property manager or property management company. This way, you still own the building, but you can hire out some of the day-to-day managing tasks.
The Drawbacks Of Being A Landlord
While owning and renting out residential properties is often a suitable way to make extra money, it does have some cons. As with any real estate investment, you need to know the potential risks and determine if they are something you can handle.
Some cons of being a landlord include the following:
- Significant investment upfront: While owning a few residential units might be more affordable than owning commercial properties, it’s still not cheap. You want to ensure that spending hundreds of thousands of dollars upfront is worth it, as it can take time to recoup the costs.
- Tenant management: Managing rentals means addressing the needs and concerns of your tenants. This means you need to stay up on maintenance, follow the laws, and handle problems that arise. While you can outsource some of this work to a property manager, these tasks do need to be completed.
- Time cost: Real estate is often discussed in terms of passive income, but it can be more complex than that. While there are benefits to setting your hours and being your boss, being a landlord is still work. You need to keep up on the property, and you’ll do more work as you first get into rental properties.
Over time, you’ll likely get a better idea of which rental properties will make money, and you’ll develop a system to do the work effectively.
At first, you’ll have a learning curve, and it might take a couple of years to see any profit.
However, with these pros and cons in mind, you can decide whether the time and money required are worth it.
While you can likely make a profit, you still have to learn a good deal about real estate at the beginning.
