Close this search box.

The Pros and Cons of Rental Properties

Owning rental property can be lucrative in the right market. When conditions are favorable, you can live off rental income without working another job. However, even when things seem stable, you never know what can happen. The economy can turn for the worst, and you can find yourself with tenants who can’t afford the rent. Does that mean that you shouldn’t invest? Not necessarily. While rental properties usually do well, there are pros and cons to owning and investing in them. Let’s take a look.


The idea of owning or investing in a rental property is a dream for so many, but you need to consider all of the what-ifs before you take the leap. You need to be able to the question is rental property a good investment? There needs to be an affirmative before thinking about buying or investing hard-earned money. One way to make a definitive decision is by researching online. In addition to following housing trends, you can also review a guide about rental properties and decide whether they’re a good investment for you.

Pros of Rental Properties

There are a lot of perks that go along with rental properties. For example, companies like Rentola allow you to communicate directly with hosts to book your desired dates. Not only can you earn passive income, but various tax benefits accompany it. In terms of taxes, the IRS can allow you to claim and deduct specific expenses that include depreciation, average maintenance expenses, and home improvement. Note that you need to keep meticulous records to make it easier when it comes to filing your taxes. It will help if you keep your receipts if you’re ever audited. If your property is a seasonal rental, and you plan on claiming on your taxes, you can live in it for 14 days and still deduct the expense on your taxes when others rent it. This also depends on your state and the laws about seasonal rentals. If you only rent a spare room (think Airbnb), you can also write off a percentage of the mortgage interest. However, it would help if you also were mindful of any zoning laws in your area.

Cons of Rentals

Even with all the positives, there are still some possible drawbacks. For instance, taxes can increase anytime, even with a fixed mortgage. This is especially true if you live in an area considered high risk. Areas prone to natural disasters tend to fall into this category, so this is something to keep in mind. In addition to the long-term mortgage rates, you must consider what kind of tenant you want in your property. Some people look great on paper, but when they move in, it’s another story. They might decide to throw parties, destroy the property and not pay rent. Depending on where you live, you might have to go to court to get them out. This is why screening applicants and verifying employment and their previous rental history is so important. It would help if you also asked for at least one month’s security deposit.

Neighborhood Decline

It would help if you also accounted for possible neighborhood decline. You might lose money on the property because of inflation causing homelessness or the neighborhood not expanding as rapidly as you’d hoped. This is another reason you need to do your homework and research the neighborhood’s surrounding areas and the financial projections.

The Role of a Landlord

As a landlord, you are obligated to not only maintain the property but also make sure that the tenants are behaving appropriately. In terms of upkeep, you need to ensure that the house or apartment has annual HVAC maintenance and plumbing inspections are always up to code. While you don’t necessarily need to install the latest tech trends or high-tech appliances, doing so will allow you to charge higher rent. You also want to think about the rental terms. Do you want to rent out the property month-to-month, or do you want to find tenants looking for more extended periods? This needs to be determined before advertising the space. You also need to check with local authorities whether short-term rentals, similar to Airbnb, are allowed in your state. Several states, such as California, have strict laws about 30-day rentals. The last thing you want is to be fined for not following state laws.

Contract Stipulations

Finally, you must create a contract that protects you and your property. It should include the length of stay, the amount of the security deposit, what types of furnishings and appliances are provided, whether tenants can make changes, and the conditions warrant eviction.

Leave a Reply

Popular Posts