The Pros and Cons of Owning Rental Properties

When it’s done correctly, owning rental properties can boost your income, enhance your life, and help you establish a legacy. Unfortunately, too many people leap into rental property ownership without fully understanding the benefits and drawbacks. To help you understand whether the decision is right for you, here are the biggest advantages and disadvantages of owning rentals:

Rental Properties: The Pros

 Regardless of whether or not you’re an experienced property manager, there are dozens of benefits to owning a rental property. Some of the primary benefits include the following:

• Increased income. One of the main pros of owning rental properties is the passive income it can generate. When you purchase property at reasonable rates and rent it out, it’s easy to cover the payment on the building while also earning some extra money in your pocket each month. As you purchase more rental properties, this passive income compounds and can eventually become a significant portion of your overall income.
• Freedom. Owning rentals allow you to travel, explore new cities, and meet new people. Many property owners love the flexibility rental properties afford them and seek to make a lifestyle out of owning rented real estate.
• Asset building. Owning rental properties allows you to build a bank of assets you can rely on down the road. If you decide to stop renting your properties, it’s easy to sell them or pass them along to adult children or grandchildren.

Rental Properties: The Cons

• Commitment. While owning rental properties allows for plenty of flexibility, it also requires high levels of commitment. If you’re planning to leave town, you’ll need to appoint someone to be available for your tenants and handle your properties if needed.
• Expense. Owning rental properties requires a high startup investment. In addition to purchasing the properties, you also need to be able to cover the taxes and insurance on the property.
• Uncertainty. While it’s wonderful to own rentals in in-demand areas, it’s wise to remember that tenants ebb and flow and that you may well experience periods where you have no renters in a building, which can impact your income and lifestyle.

To Buy or Not to Buy?

While purchasing rental properties can be a fantastic option, you need to know what you’re getting into before you make the commitment. While there are pitfalls of owning rentals, people who can handle the stress and uncertainty inherent within the pastime can reap major financial and lifestyle rewards.