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The United States is home to about 11 million individual landlords. Finally, your time to join this distinguished group of real estate investors has come.
Maybe you just bought or built a rental property. Or you've acquired a second home and finding that you no longer spend much time in your first home, you decide to rent it out.
Regardless of your path to being a landlord, you're now toying with the idea of taking the "for rent by owner" path instead of outsourcing the job to a professional property management company.
Unfortunately, being a DIY landlord is often a bad idea. Continue reading as we lay bare the facts.
1. You Don't Know the Law
If you're a first-time or accidental landlord, you likely don't know much about local rental property laws. As such, you might wake up one morning and erect a "for rent by owner" sign outside the property gate, ready to find a tenant. To your rude shock, a few days later, you get a call from the local authorities regarding the property.
Your mistake? You had not obtained a certificate of occupancy before listing the house for rent.
You might get off the hook with just a warning in this case, but for severe violations, such as renting a house in an area where rentals are restricted, you can be slapped with a fine.
2. You Don't Know How to Find Good Tenants
You're excited to let in your first tenant and have a taste of rental income. However, your excitement can quickly turn into disappointment if your tenant fails to pay their rent on time after just one month of occupancy!
As a landlord, you want a tenant who understands and executes their responsibilities diligently, just as you do yours. But since you're a for-rent-by-owner kind of landlord, you skipped tenant screening and accepted the first tenant who expressed interest in renting the property.
To find good tenants, you need to either use a tenant screening service or hire a property manager.
3. High Chance of Making Property Accounting Mistakes
Your goal is to earn a steady rental income. As long as you have a good tenant, that shouldn't be a problem.
However, what happens after you've earned the money? Of course, you want to enjoy your profits, but do you know how to account for the money?
Rental property accounting is a critical responsibility for every landlord. You need to pay rental income taxes and take care of property maintenance expenses.
Without proper records, it's difficult to make the most of landlord tax deductions and file accurate tax returns. And if you don't set some money aside for emergency repairs, you might be cash-strapped when the property needs urgent repairs.
For Rent by Owner: Not Recommended!
For rent by owner is a fairly popular option among rental property investors. It has its benefits, but when you bring in the downsides, it's easy to see how it's a bad idea.
Property management requires skill, time, and the right tools. Hiring an experienced property manager is the way to go.
If you own a rental property in Bothell, Washington area, look no further than PMI Equitas for all your property management needs.
