5 Reasons Being a Landlord Is Not for the Faint of Heart

Being a landlord may be a great way to bring in extra income, but it is not without its challenges. 

An estimated 10.6 million Americans own rental properties. On average, landlords own three properties, often modestly-priced homes. While renting property out is a good way to create a steady income stream, being a landlord is not for the faint of heart. 

Here are some of the challenges landlords face year in and year out. 

1. Complying with state and local laws

Landlords are business owners. As such, they must adhere to all laws and business practices laid out by the powers that be in their jurisdiction. For example:

• Landlords must choose tenants regardless of race, ethnicity, religion, sexual orientation, or disability. 
• Landlords must keep the property safe. If a tenant is hurt due to a landlord's negligence, the responsibility falls to the landlord. 
• Landlords must provide basic amenities. That means the landlord is responsible for repairs when the water heater goes out or the dishwasher breaks.

2. The risk of bad tenants

While most renters are dependable, it's only natural that a landlord might get stuck with one who fails to pay rent or damages the property -- no matter how well they were initially screened. 

Running a credit report and checking with former landlords is essential. However, they can only tell a landlord how well a prospective renter has handled their business in the past. Things can change. For example, that adorable newborn baby they moved in with may grow into a surprisingly destructive four-year-old. The long-term job that ensured they could pay the bills can disappear. A marriage could fall apart, leaving the remaining partner too little in their bank account to cover rent. 

As part of their business plan, a landlord must factor in times when the property may sit empty.

3. The complicated business of eviction

Some landlords will never find themselves evicting a tenant for non-payment. Those who do, though, face an unpleasant process. Eviction can be difficult and costly. A single eviction can cost the landlord thousands of dollars and hours of frustration.

4. Maintenance and upkeep

The best landlords are those who budget for every eventuality. In addition to spending about 1% of the home's value on maintenance issues each year, landlords must also plan ahead. That means budgeting for new appliances, a new roof, and unexpected repairs, like a sinking patio that needs to be mud jacked. 

5. Endless decisions

According to Flex Services, half of all landlords manage their own properties. The other half pays a property management company between 8% to 12% of the monthly rental amount, or a flat monthly fee, to manage the day-to-day operations for them. 

Let's say the monthly rent on a home is $1,500. That means a landlord would pay their management company between $120 and $180 or a flat monthly fee for their services. Whether tenants are living in the home or it sits vacant, these fees are due. These fees are on top of any other out-of-pocket expenses a landlord faces, including a mortgage payment, landlord insurance, and upkeep. 

Whether they've hired a management company or not, the landlord must decide everything from whether the house should be painted to whether it's wise to allow long-term tenants to adopt a puppy. 

And if they're going it alone without a management company, a landlord must be on call 24/7. 

Leasing property is often referred to as "passive" income, but that's not quite true. Being a landlord requires people skills, keen business acumen, and a dose of optimism that everything will work out as intended.