When I bought my first house in late 2004 I did so intending to use the basement area in the new addition as a room rental. The space was serviced by the furnace and forced air but also had a gas fireplace and a 3 piece bathroom. The plan was to share kitchen and laundry facilities but otherwise co-habit the house leading a separate life from my tenant. The house we ultimately sold was a 2 storey – I bought more than I needed (lesson learned) so I had lots of personal space to live in. The “den” bedroom was gravy.
It was quite easy to get a student to rent the space for $400 on a monthly basis. This money was put toward paying down my mortgage more quickly. Little did I know there were numerous challenges I had no idea I would face. Being a landlord is far from easy. Here are some of the reasons why it can be so tough to be an on premise landlord.
1) Vacancy. If you don’t have a tenant you are losing money. You are still paying for the property so an empty unit is costing you money.
2) Tenant Quality. Folks aren’t always easy to read, judge or truly know in a one off unit viewing. I didn’t check references on my first tenant which resulted in a high maintenance person living in my home.
3) Akin to tenant quality is the ability to collect rent one time and in full. My first tenant was tardy more than once.
4) Dealing with everything yourself saves money but it sure does take up a lot of time. Your other option is to hire a property management company and that will eat into your dreams of extra cash flow.
5) Tenants have rights and can be incredibly difficult to evict. There are laws and boards that deal with landlord / tenant disputes and the process of dispute resolution can last months.
6) Cash flow is required. While landlord insurance can help protect damaged goods that the landlord owns on the property items such as appliances or even the furnace eventually need to be replaced. You also need to pay the mortgage even when your property has no tenant.
7) Sharing a space, like I did, means that two people who do not know each other have to adapt to each other. If you are like me and think there is a logical way to load a dishwasher you can almost guarantee your co-habitant will be oblivious to such logic.
8) To save money on home maintenance you will likely be looking at having a trailer, a hitch and a number of tools. Hiring a repairman for every problem that arises on the property will lose you money fast. You need to perform spring and fall home maintenance just like you would on your primary residence.
Given my past experience I don’t think that being a landlord is something the SPF’s are interested in doing again soon. Yes, if things go right you will see some profit and perhaps pay off the mortgage a little quicker than your original amortization but a lot of issues can arise to thwart your real estate mogul dream.
What other challenges do would be landlords need to consider?