I don’t know how the real estate market is in your area but here on the Space Coast, it is pretty good. No clearer sign is that in the last six months I have received a number of questions from retirees about acquiring rentals.
For example, “Hi Dan, I am 67 and probably retiring in the next couple of years. I was talking to an agent who says he has a property for sale that would be perfect to rent out. Other houses nearby rent for enough to cover the mortgage plus a couple hundred more each month. Sounds like a good way to get some extra income. Thoughts?”
Owning rental property and collecting income has great appeal to many. It can be great way to generate some cash flow and build wealth but…
Doing well with rentals is not nearly as easy as many people perceive it to be. Most retirees should not invest in real estate through direct ownership of rental properties.
My first question to would-be property moguls is always, “Have you ever been a landlord before?”
Using the word “landlord” is the key. For most people, the word evokes a number of images and thoughts that are far less glamorous than the idea of simply cashing an unending series of checks.
Owning a rental can be a time-consuming job. When the air conditioner fails or the toilet leaks, the owner gets the call. Now, some people love this and have a natural affinity for these tasks. Others don’t have any interest in being a handy man.
If the client doesn’t have the expertise, time or inclination, they can hire help, even a management group. None of those services are free. Regardless, it doesn’t take much maintenance to eat up the potential profit.
Another fun landlord roll is dealing with tenants. Despite all the screening that should be done, tenants can fall behind or stop paying rent altogether. Life happens and things change. The renter loses a job or gets sick. Some have clean background checks and put on a good show to get into the lease but really aren’t good people. I have seen tenants move out in the middle of the night and others refuse to move out even though they had not paid their rent for months.
Also, let’s not overlook the fact that some renters are not as gentle on a property as they would be if they owned it. Those repair bills can add up.