The Overlooked Benefits of Being a Landlord

Anyone who’s tried to sell a piece of real estate in the last few years can tell you how frustrating and lengthy the process has been, whether they’re a professional real estate investor or a homeowner. Prices have been sliding consistently, and have only now started to show signs of leveling out, and many renters who have considered buying have decided to remain on the tenant end of a lease agreement. It’s been a tough few years for sellers nationwide, and for everyone whose home is their largest asset.

There are some homeowners who have turned to a different route, however. The recession has seen a spike in “reluctant landlords,” real estate owners who intended to sell, but have decided to sign a lease agreement instead of a sales contract. While for most the decision was a last resort, many of these reluctant landlords have discovered some of the overlooked benefits of becoming a landlord.

Diversified Assets & Income

As any financial advisor can tell you, there is safety in diversity; if one basket falls, the rest of your eggs are safe in different baskets. Landlords have multiple sources of income, ranging from salaries to the rental income received from each of their separate rental units. Further, each rental property is an additional asset, helping to fortify their net worth.
Tax Advantages

All homeowners are familiar with some of the tax advantages associated with real estate, such as mortgage interest, private mortgage insurance, property taxes, and depreciation. Landlords, however, have some additional tax advantages, since their rental properties represent a business investment. The following deductions are available to landlords: hazard insurance premiums, property management costs, government-required inspections and registrations, landlord forms, and any repairs and maintenance performed to make the property more habitable.

Appreciation & Net Worth

It’s easy to be cynical about real estate appreciation in today’s climate, but the fact is almost all real estate appreciates considerably over long periods of time. At the same time your real estate is appreciating, your mortgage balance is decreasing (paid down by your tenants), creating equity and adding to the landlord’s net worth.
Passive Rental Income

Who doesn’t want to earn money without having to work for it? Sure, there is work required to manage rental properties, such as tenant screening and securing occupancy for a new lease agreement, and making repairs occasionally, but all of the work involved can be outsourced to a property management company. As landlords add rental properties, they create more passive income for themselves, freeing up precious time with their families and enabling many landlords to retire early.

All investments involve risk, and being a landlord is no different. Tenants can sue, or trash your rental property, or decide they are no longer interested in paying rent, and these are all costly problems for a landlord to resolve. However, like other investments, the risks associated with being a landlord can be minimized through preparedness and research, by doing proper tenant screening. Not everyone is cut out to be a landlord, but for those willing to try becoming a landlord, there are plenty of benefits, and the ability to sell their property whenever they wish, instead of being forced to sell during a slow real estate market.