Risk and Benefits of Being a Landlord

"If your thinking is sloppy, your business will be sloppy. If you are disorganized, your business will be disorganized. If you are greedy, your employees will be greedy, giving you less and less of themselves and always asking for more." -Michael Gerber

Investing in real estate is a great way to increase your wealth through capital apprecation. However, if you are interested in buying and renting residential properties there are several things to consider. Being a landlord can be extremely stressful and expensive if you have managed to invest in property which has not been well maintained. In this article, we will discussion the benefits and risks of renting out residential real estate.

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One of the biggest benefits to renting property is that it is very lucrative. Not only are you making an income each month you also possess a real physical asset which is quite different then owning stock you will never be able to see or touch.

Many people just are not comfortable owning something they can no see. In the recent decades, many people have decided not to invest in the stock market and place all their money into real estate. Who could resist! With rapidly increasing prices, high demand, and almost no risk - the benefits are obvious.

Rental real estate gives you a monthly income. Property also increases in value and your capital appreciates each year. Real estate is one of the few investments that do extremely well in time of increase inflation.

Remember, rental real estate can also be purchased with borrowed money and this is called leverage. For almost no money down an investor can own and rent a large residential property like condos or apartments. If your rental properties cost you more then you received in income from them, the profit is tax free. Once there is equity in your residential property, you can apply for a home equity loan and use that money to invest with.

There are also several risks associated with rental properties. First and foremost you are liability for any injuries which take place on the property. If a visitor breaks a finger in a door, you have to pay for it. Not only that but you are subject to lawsuits which will be suing for not just the injury but emotional distress. This is why it is extremely important that all of your properties meet government building and living standards.

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There are always unexpected expenses. Apartments flood, walls get cracks, and foundations leak. They are all your responsibility. On top of that you have to deal with tenants. Ninety percent of your tenants will be great people who mind their own business but the other 10% will make you want to rip your hair out.