Should You Become an Absentee Landlord?

Today we have a guest post for you from Listen Money Matters about whether or not you should consider becoming an absentee landlord to create another stream of income.

The idea of investing in real estate in order to turn it into a rental property and gain a steady income might sound appealing, but there can be both positive and negative effects of following through on that idea.

In addition, if any of the properties you may be considering are not nearby, you should know that becoming an absentee landlord may be more difficult as the distance increases.

So if you’ve been wondering if you should become an absentee landlord, you should know some of the positive and negative aspects before you make a decision.

Negatives:

• Repairs– Building a relationship with several different repair businesses will be essential if you are managing rental properties from a distance. You need to be able to trust each company you hire to get repairs done timely and to your satisfaction without you there to oversee it.
• Distance– Being an absentee landlord makes conducting business harder. Collecting rent, signing contracts, etc. are more difficult when you aren’t nearby to do these tasks. Also, if you are considering purchasing property sight unseen due to distance, you have a whole other set of concerns, such as whether you are paying top dollar for what turns out to be an uninhabitable mess.
• Property Inspections– Driving by your property to make sure it is being well cared for by your tenant isn’t easy to do if you aren’t nearby. In addition, if repair work has been done, do you need to inspect it to ensure the work you are paying for has really been done?
• Emotional Ties– Without a property manager, you could get to know your renter a little too well and form an emotional bond with them. This could be bad for your business overall because you might allow them extra time to make a payment, which could turn into missing a payment altogether. Eventually, if they miss several payments, the closeness you have with that tenant could make it more difficult for you to make the business decision to evict them.
• Property Manager– You may need to hire a property manager to handle repairs, sign contracts for you, and collect rent. Although doing so could eliminate many of the hassles of being a landlord, it can also cut into your profits and lower the return on your investment.

Positives:

• Steady Income– If you are careful about the property you buy, and who you rent to, you could have a steady stream of income for many years without having to invest a lot of additional money in repairs.
• Wider Choice of Properties– If the quality of available rental properties in your area is not to your liking or there simply aren’t any for sale, looking for real estate in another location may be the answer.
• Greater Increase in Your Investment– Potentially, the property value of your investment should increase and allow you to sell it for a profit in the future, should you choose to. But the market can be different in different locations. By choosing to purchase an investment property in a location other than where you live you might be able gain larger increases in your investment.
• Property Manager– Hiring a property manager can be a positive by enabling you to become an absentee landlord without all the headaches and hassles.

So, should you become an absentee landlord? Because there are many factors to consider, the answer is not cut and dry. But hopefully knowing the positive and negative points of such a decision can help you arrive at the answer that is best for you.

Kayla is a personal finance blogger in her mid-20s who loves to write about money topics of all kinds.