and outsource the debt obligations and interest in the form of collected rent from your tenants. Each year, your rental fees can be increased while the property depreciates, yielding tax savings, and the asset depreciates due to asset values and market trends,” notes Luke Smith, a landlord, home flipper, and real estate expert in Louisville, Kentucky. The downsides, of course, “are that you are responsible to pay back the loan you took out from the bank and you’re liable for each tenant’s safety. Your tenants will make or break the investment; if they don’t pay, you have to evict them and get the unit back in shape for another tenant to move in. Vacancies equal lost income. Your lender doesn’t care whether or not your tenant paid – they just want your mortgage paid back each month.” Good candidates nowamoratoriums on evicproperty values have “The long-term oppordays for being a landlord tions, leaving landlords tunities with real estate also increased during the are folks who can stomlittle recourse and loadwill always be there. No coronavirus crisis. So ach the ups and downs of ing their ledgers with red owning real estate and matter when you purreal estate for at least five chase property, there will ink. renting out property is years per property. Fortunately for them, still a good thing, so long be challenges that come “That’s a good amount your way. But if you see the current federal mora- as you can cover your of time to build equity torium on evictions is mortgage independent of it as a long-term focus, and increase rents, which due to expire on June 30 rental income,” explains owning rental property will allow for decent cash of this year. But if coro- Reiner. “The demand for can be a smart business flow,” adds Smith. “If navirus numbers climb decision – especially if rentals is also likely to you are willing to take on again, the Biden adminis- increase post-pandemic you are detail-oriented, the risk and hold an asset tration and state govern- once these moratoriums can fix up a property for that period, you’ll ments may extend this yourself, have the money likely do well with the end and evictions and deadline. And that begs to purchase a property, foreclosures come into investment, provided you the question: Is being a and care about your ten- manage the property well play.” landlord still worth it? Count Eugene Rendel, ants,” he says. so that it can retain its But don’t kid yourself: value.” Omer Reiner, a Realtor who recently became a Landlording is hard, and home flipper in Fort first-time landlord in Andrew Ragusa, CEO/ Lauderdale, Florida, says Sheboygan, Wisconsin, as stressful work, and sucbroker of REMI Realty in cess is not guaranteed. yes. another true believer in Plainview, Long Island, “The upside is that you New York, says his recipe “Although collecting rental ownership, despite can buy rental property rent has gotten harder, for success as a landlord current challenges.
Is Landlording Still Worth It? What to Consider Before Investing in a Residential Rental Property
By Erik J. Martin he past few years were good to many rental property owners. Tenant demand increased, as did rental rates in many markets. Many millennials chose to kick the homeownership can down the road and lease properties. Meanwhile, mortgage rates dropped, allowing landlords to purchase and refinance more affordably. Then the pandemic happened. Suddenly, leaseholders across the nation faced hardships, with many being unable to pay their monthly rent. Governments issued
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of multiple properties is to purchase a diamond in the rough fixer-upper, rehab it to bring up its equity value, rent it out at top dollar, refinance to pull as much equity out as possible, and repeat the process. “Look for properties that have landlords seeking to exit the game after collecting for long periods of time already. And try to hire a good property manager, especially if you are out of state or the property is too far away,” he advises. “Having great management is key.” Consider near-and long-term rental trends as well. “The future of renting may look different after the pandemic ends. If work-from-home trends are here to stay, demand may switch from big urban centers to suburbs and cities with a lower cost of living,” notes Reiner. “Demand for increased living space rather than shared amenities is also likely to increase. Be sure to study the housing trends in your area before purchasing any rental property today.” Lastly, before committing to the landlord life, consider what else you could do with the money. “Real estate is hard to get out of, so think carefully about investing the money elsewhere for a decent return if you can get it. If you are committed, be sure to have enough funds to ride the ups and downs of the market as well as capital for repairs and maintenance,” Smith recommends. 5
