Are you considering becoming a first-time landlord? Transitioning your personal home to a rental property is a huge decision. Here’s a few pros and cons to help you make the best decision.
Pros of Being a Pensacola Landlord
- Tenants pay down mortgage- Ultimately, the goal of owning a long-term rental property is to build equity over time while your tenant pays down your mortgage balance. The ultimate goal is to earn passive income with little effort and have a large amount of equity in the property. This comes from long-term ownership.
- Property value appreciation- An appreciating asset is the main perk of becoming a landlord. If you own your rental property long-term, you’ll have a debt-free, income producing asset.
- Retirement income and savings- Owning rental property is one of the most powerful tools to help you build wealth for retirement. Having a paid off rental property can mean you have a monthly income for retirement and an inheritance for your family members.
- Tax advantages- You’ll have tax advantages to write off the income earned for your property rental. Expenses like maintenance costs, management fees, property taxes, insurance, and mortgage interest are important tax deductions. You’ll also be able to take a tax deduction for depreciating your property, but keep in mind this depreciation will be recaptured and taxed when you sell.
Cons of Being a Pensacola Landlord
- Maintenance and expenses- You will need to routinely invest in your property to have a successful real estate endeavor. Your tenants will never maintain your property in the same manner you will, and in addition to turnover expenses, you’ll need to have funds for capital expenditures like a new roof, new water heater, new appliances, and new HVAC system. We also must contend with hurricanes that can cause damage and potentially halt your rental income. If you do not have excess reserves for these items, you will likely not be happy as a landlord.
- Vacancy- You should build in a buffer for vacancy time between tenants and expenses connecting with finding a new tenant that falls within normal wear and tear like painting and flooring.
- Capital gain tax advantage loss- If you’ve lived in your home two of the previous five years, you should be exempt from capital gains taxes on the sale of your property. If you’ve lived in your home for two years and rent your home for three, you’ll have to pay additional taxes when you do sell.
- Dealing with tenants- Managing your tenants is a tough job, trust us. Pricing, marketing, screening, leasing, collecting rent and handling maintenance are pain points for landlords. Hiring a professional property manager helps ease this burden.
- Liability- Being a landlord can be a liability and could represent a huge financial risk to you. Be sure you have proper knowledge of Florida Landlord Tenant Laws, a solid Florida attorney-prepared lease agreement, and the experience to properly handle tough situations when they arise.
If you’re still on the fence on whether selling or renting your Personal home is the best decision for you, our Realtors can help you list your home for sale and for rent simultaneously. Contact us today to get a market analysis for your Pensacola area rental home to help you decide if you’re ready to be a landlord.
