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What to expect when becoming a landlord
So often we hear from the perspective of tenants on what it’s like to live in a rental, but what about the other end of the spectrum? For those heading into retirement that might be taking on an investment property or leasing out their family home and acting as a landlord, we wanted to have a look at what this role involves for your later years.
We’ll not only look at the potential pros and cons of being a landlord, but also speak with a real estate agent about the kinds of things you need to keep in mind as a landlord.
The pros and cons
While there are plenty of advantages to becoming a landlord, it’s important to take the cons and potential challenges into consideration. For example, you’ll need to have a think about the time commitment you’ll be undertaking. Do you need to be on call and reachable around the clock for either your tenants directly or your real estate agent?
Although it’s highly unlikely, there are some cases where you hear about the ‘tenants from hell’, who might end up not paying rent on time, or damaging the property. The best way to combat this kind of headache is to make sure you have a good screening process in place, as well as a properly structured lease or rental agreement. An attentive real estate agent is always handy too!
In general, you’ll be trying to avoid having down time where the property isn’t filled, but be mindful that this may happen. And there will also be general upkeep costs like repairs, as well as insurance and property management costs (if required), but if you’ve got to grips with these early in the process, they shouldn’t seem so daunting as they crop up.
Despite any potential woes, the pros to becoming a landlord are why so many consider or end up taking on the role. For many, owning and leasing out a property gives you the wealth and income advantages of a diverse income through diverse investments.
Depending on the property’s location and how much you decide to be involved in the management of it, you may have the flexibility to be involved in a pretty minimal way, giving you the opportunity to free up time and enjoy your retirement in your later years.
More than money
As well as the monetary gains, it’s hard to argue with the professional development opportunities that come with being a landlord. Whether it’s your source of income during retirement, or something you do ‘on the side’, there’s the opportunity to get stuck into any home repairs, and get experience dealing with people you may not have crossed paths with had they not become your tenants.
From a real estate agent’s point of view, they ideally want to take any of the potential stresses of being a landlord away from you.
Risk and reward
“The role of landlord can be 100 per cent stress-free, a total nightmare or anywhere in between,” says Matt Thompson, Director at Graczyk Thompson. “The uncertainty of tenant behaviour is often the most challenging aspect. A good property manager will minimise your risk, but all landlords should understand that things won’t go right all the time. My advice to any prospective landlord is to ensure they find a reputable property manager, take out landlord insurance and be selective when approving tenants. It’s better to take a measured approach to choosing a tenant than select someone only to regret it later.”
Along with the potential risks of less than ideal tenants, it’s important to prepare for the emotional side to being a landlord and renting out a property – especially for those who might be renting out a family home as a source of income. It’s totally understandable that you might struggle at first to get to grips with someone else renting out the home you once brought up your kids in, or spent many years in with a partner, but overcoming those challenges will open the door up to new opportunities.
“Renting your family home or investment property can be financially rewarding if done correctly. For many over 50s, a property may be paid off by the time they come to rent it out, meaning a healthy weekly income. Combine this with any capital growth the property achieves, and it can be a great way to build wealth,” Matt says.
While you could probably guess that it’s in a real estate agent’s interest to encourage you to employ them, there are benefits to the relationship that you should consider to make the whole experience smooth sailing.
“A property manager’s role is to bridge the gap between tenant and landlord – making both parties’ lives easy,” says Matt. “A good property manager will go out of their way to assist when required because it often results in a smoother lease in the long run. It’s better to have all parties respecting each other, which nearly always results in a better experience for all.”
So, with the pros seemingly outweighing the cons, do you think you’ll be taking on the responsibility of being a landlord in the future? At the end of the day, it’s really your call on how involved you are, as long as you have a plan of action in place!
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