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In these troubled economic times we're
looking for a way to make a little extra cash. To this end, many people
like to purchase buildings, condos or apartments and then rent them
out. This type of investment is appealing for several reasons:
a purely economic viewpoint, renting sounds like a great idea that can
possibly give you a better return on investment than what a lot of the
financial institutions are offering. If we lived in a perfect world,
everything would be rosy and you would have a cash machine chugging
away night and day, but unfortunately such is not the case. In reality,
there are a lot of headaches associated with rental property. The first
thing you have to realize is that the rental property does not run
itself. You need people to market it, maintain it, and to live in it.
This translates into real estate agents, homeowner associations,
maintenance vendors, and renters. In other words, your troubles are
- It represents an asset you can possibly sell at a future
date, hopefully for a profit.
- It's also a handy tax write-off, particularly the interest
on a mortgage.
- And it is a seemingly steady cash flow that can hopefully
pay off the investment over time.
Homeowner or condo associations typically watch
your every move and are eager to cite you for the slightest violation
of the rules. They are also not bashful when it comes to presenting you
with bills for dues or some other innocuous improvement to the common
areas of the property (which, of course, you were never consulted on).
repairs are an ongoing problem as something will inevitably go wrong at
the worst possible time, such as when you are miles away on vacation
somewhere. Air conditioners, refrigerators, stoves, dishwashers, etc.
all have an uncanny knack for breaking down, even if you have a
maintenance contract with someone. Then there is the problem of
repairing the roof or parking lot every few years, representing a tidy
outlay of money.
Perhaps the biggest problem is the renter
though, the tenant who leases the property. Typically, the relationship
between landlord and tenant is either very good or very bad, rarely is
it in-between. The person who pays his/her rent on time, is not a
deadbeat, and takes reasonable care of the property is becoming few and
far between. Most assume no responsibility for the property, live like
slobs, and expect the landlord to be on-call 24/7 even for a problem
the tenant created. True, there are also slum lords who neglect their
responsibilities, but renters can be equally irresponsible as well.
Then there is the problem of evicting a deadbeat tenant which involves
a long and nasty legal process. Hopefully, the tenant will not
seriously damage the property or remove appliances during the eviction
With all of this in mind, I am seeing more and more
people shy away from investing in rental properties. In a way, I guess
a rental property is a lot like a boat whereby the best two days are
when you buy it and when you sell it. When you compare the headaches
associated with being a landlord to other types of investments, maybe
that low interest Certificate of Deposit doesn't look too bad after all.
Such is my Pet Peeve of the Week.
Keep the Faith!
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About the Author
Tim Bryce is the Managing
Director of M. Bryce & Associates (MBA)
of Palm Harbor, Florida and has over 30 years of experience in the
management consulting field. He can be reached at firstname.lastname@example.org
Download Tim's eBook
(PDF), "The Bryce is Right! Empowering Managers in today's Corporate
Culture" (free DOWNLOAD).
Copyright © 2009 by Tim Bryce. All rights
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Article Published/Sorted/Amended on Scopulus 2009-05-19 14:39:08 in Business Articles