LETTING OUT YOUR HOME - THE PROS AND CONS
Although it may not have been your original intention to become a landlord and let out your property, there are certain situations in life where the need may arise. Be it needing to relocate for work or dealing with financial difficulty that needs to be addressed, if the end goal is to hold onto the property, letting it out could be a feasible option. However, it does have both advantages and disadvantages.
Financial relief or the elimination of a double house payment
Rental income will be generated when the property is let out. This money can be used to pay the bond on the property, as well as other expenses related to the home, provided of course, that the rental income is sufficient to cover these overheads. Even in the instance where the money received is not enough to cover everything, it will provide some financial relief.
In certain cases, it is better to have a tenant in the house than have it stand empty
While there is a certain amount of risk to having a tenant in the home, leaving the home unoccupied can come at a greater cost. If the home is vacant, it can become a target for thieves, vandals or squatters. This is especially true if the owner has relocated to another city or province and is not able to keep an eye on the property on a regular basis. The right tenant can provide protection to the property and assist in maintaining it.
The tenant could be the future buyer of the property
If you decide to sell the property, there is always the possibility that the tenant may purchase it. The tenant may have been renting while they are saving for a deposit or to cover other costs associated with a property transaction and could be the ideal buyer. The rental deposit could also be used as part of the purchase deposit.
Now for the downside to letting out your property:
The owner may require equity to purchase another home
The only way that letting out the property can be a financially viable option is if you can afford to rent or buy somewhere else. If you are relocating and intend to purchase another home, you may need the equity from your previous home as a deposit. If this is the case, then letting out the home would not be an option.
Certain tenants could make it more difficult to sell the home
If the tenant does not want to purchase the home, they may not be very cooperative during the sales process and could make it difficult for buyers to view the property. There is also the risk that the tenant has done little to ensure the upkeep of the property or has caused damage. If the home is unoccupied, it is far easier to make repairs, clean up and get the property ready for show days.
Dealing with delinquent tenants
Once a tenant has taken occupancy of the property it can be a long and tedious process to evict them, even if they are no longer paying their monthly rental. Landlords always run the risk of having to deal with a delinquent tenant who is costing them money and possibly causing damage to the property. Incurring additional expenses such as lawyer’s fees eliminates any benefits of renting the property out. This risk can be mitigated to a degree by proper vetting and background checks on all possible tenants.
Managing the property from a distance can be difficult
Managing a rental property could prove to be rather difficult, especially if the homeowner is living in another city. If this is the situation, it will make sense to hire a property management agent who has the expertise to effectively vet tenants, collect rent and ensure the property is looked after.
Looking at both the advantages and disadvantages will assist in determining whether letting out your property is the best decision in your current situation. While becoming a landlord can be beneficial, it is not for everyone.