More than Just Rent Checks: Being a Landlord

By Keith Blazek1 Comments

Many of us have rented an apartment, duplex, condominium, or other type of residence at some point in our lives. As we wrote our monthly rent checks it is likely the thought crossed our mind, “I wish I was the one receiving this check rather than writing it.”
 
Many Equity Trust clients have used rental properties in their self-directed IRAs because of the added benefit of collecting those monthly rent checks, either tax-free or tax-deferred depending on the type of account.
 
But there is much more to being a landlord than simply collecting rent checks. In a recent Eriesense newsletter, Erie Insurance outlines some important considerations for current or hopeful landlords. Here are some starting-off thoughts:
  • The good…Many people only focus on the financial gains of being a landlord. The benefit is that there are still many opportunities to find properties relatively inexpensively and the demand is still strong for good rentals. If you can purchase a property, manage the expenses, and still rent it out for more than the monthly mortgage payments you can realize some solid financial gains. If the property is held within the tax-advantaged environment of a self-directed IRA, the residual income can help grow your nest egg.
  • And the bad…While a rental could mean solid returns, it can also bring headaches and unforeseen expenses. Some pitfalls may include dealing with tenant complaints (even when it’s 2 a.m.), property damage, vacancy issues, and potential liability. It’s important to weigh your options, perform your due diligence, and make a decision that is right for you.
Quick tips to consider before becoming a landlord:
  • Learn the laws for your state or municipality and make sure you follow them. You may want to speak with other landlords in your area or consult with a real estate attorney.
  • Perform your due diligence. Verify everything and make sure to research and screen potential tenants and applicable regulations.
  • Create a paper trail and document everything. Make sure you have signed contracts and lease agreements. Keep records of all income and expenses, agreements and disputes, etc. for reference and to support your decisions.
  • Be honest and upfront. You will create more problems by not disclosing important information or trying to cut corners. If something is broken or agreements change the term of the lease, it is always better to address it openly and honestly.
If you’ve decided that being a landlord is the right move for you, talk to one of our Senior Account Executives about growing your monthly income in a tax-free or tax-deferred environment – schedule a free one-on-one IRA checkup today.