The Pros of Rental Property

The tenant pays your mortgage payment. You won't make a lot
of money while you have a mortgage. But where else can you have someone buy something for you? You start to make real money after the mortgage is paid off. In addition, some properties are so cheap that the rent will pay off a 15-year mortgage. So in 15 years, you have a free house.

Rentals are a great hedge against inflation. Notice how gas prices are going up again? The prices of everything else increase with gas prices. Food, clothes, electricity, and everything else goes up. That means your house will go up in value over the long term. But, you locked in the price when you bought it when prices were lower.

I don't want to make it seem like rental properties are a no-brainer. There are some risks involved. No one should buy a rental property unless they are prepared and understand the risks. 

The Cons of Rental Property

Problem #1: Leaky toilets. This is the first thing you should be aware of. We have seen that most problems are not emergency problems. Many landlords work around these problems by hiring good help in the beginning. They find a good handy man and negotiate on the price before he does any work.

Problem #2: Management. You can find a good property management company to handle everything for you. But, you still have to manage the management company. If you do not have extra time to manage problems, then rental property is probably not for you. Some people like this buy larger properties and hire better managers. They meet with their manager once a month and let them handle everything. This works for them because they bought a larger property with better numbers. That extra money can be used to pay a better, more competent manager.

Problem #3: Collecting Rent. This is where many people mess up. You have to be persistent and firm. If you are a sympathetic person, and prone to give people a "break, then rental property is not for you.

Problem #4: Evictions. This is the bad side of the rental business. Most evictions occur because you didn't pre-screen a tenant well enough. You must budget enough so that you can afford an eviction when it happens. An eviction will cost you 2-3 months of rent. That is why you must have a rainy day fund for situations like this. 

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