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4 Landlording Drawbacks That Can Be Embarrassing To Property Owners
It’s not all fame and glory in being a landlord. Calling yourself a property investor and mentoring newbies can be a personal fulfilment of some sort. But managing a property is not as easy as anyone outside this business think. Let alone managing multiple properties. It’s not about sinking into your sofa everyday chasing the latest Korean drama without a care in the world and reach out your hands to collect the rental cheques when the date arrives. But of course. Those who are selling real estate seminars will want you to believe that.
Because outside the “stable recurring passive income”, lays a world that landlords will be embarrassed to admit others. It concerns a world of hands-on sweaty days, and a life of fear that one small looking event can quickly snowball to an issue big enough to cripple your finances. It’s a scary world out there as we are not playing a computer game where rentals always arrives and arrives on time. Here are the 4 biggest drawbacks of being a landlord.
1) Handling difficult tenants
This is where you meet people of all sorts of personalities and learn to appreciate each individual for being unique. You will get praised, but usually more abuse than praise. So while you might be giving night training to new investors like a grandmaster, in the day, you will be at the service of tenants who are mean to you. Bowing to their simple demands like getting the washroom scrubbed. Listening to complaints that you find ridiculous but still obligated to resolved them as your duty.
And no matter how heated a confrontation can go, you know that you have more to lose compared to a rouge tenant. The most a tenant will lose is the security deposit. The physical condition of your property is at their mercy. And even if you fulfil your obligations as an honourable landlord, there is no guarantee that an unhappy tenant will hold up their end of the deal by paying rent. Take them to court? Get real. You will realise that that is not logical in most instances when you get into such situations yourself.
2) Becoming a 24/7 hotline
You are on standby 24 hours a day, 7 days a week. Not just during office hours between 9 to 5. If you are not prepared for that personal sacrifice, take a step back and run as far away from real estate while you still can. Tenants can call you up for any reason that you could possibly dream of. And they usually feel that they have the right to do so as they are the paying customer who is putting “passive income” into your pockets. And you cannot blame them for having such expectations. You can only blame yourself for accepting them by venturing into landlording.
So unless you have hired someone to manage the properties for you, don’t expect peaceful getaway vacations, a quite time at a romantic movie without being on your toes, or even deserving family time over dinner. Because a tenants can call you at anytime with a problem you just cannot sleep over. Your property manager may be able to handle most issues for you. But they still need your approval for decisions that only you can make. And when they call, it will be issues that you will be fretting over for hours shaking your head.
3) Horror of cash flow problems
If you are like most investors, you will be paying your mortgage with rentals. This puts your business under extreme dependability on cash flow. The weirdest unrelated things can cause a tight squeeze on your cash flow. Like a need for the tenant to buy a car can cause disruptions to rental collection. At times like this, you have to fork out cash up front. And during this time, running into major problems like a leaking roof can compound your cash problems. You might have to draw on an expensive credit line to tide things over.
The prudent practice is to keep a cash buffer stockpiled in the local bank. But if you are a maverick of an investor, those cash will be most likely be used to buy another property. Before you know it, desperation leads to confrontation with your tenant and we go back to point one. Living in fear of cash stoppages is not a healthy way to live. The best remedy is to keep a comfortable amount of cash on hand.
Just like any business you get into, there is a certain amount of liability you can be held upon. Food and beverage companies are responsible that their products are safe for consumption. credit card companies are responsible for keep tight security on client personal information. And transport companies are responsible to bring you from one place to another safely. Even the military is responsible for a soldier’s safety especially during peace time.
There are a number of explicit and implicit responsibilities borne by a landlord. Sometimes, you even run into issues that you have absolutely no business in dealing with. But because it is your business, you feel obligated and responsible to take care of it. The majority of tenants are good people who just want a peaceful place with a roof over their heads. But there is a small minority that will take up any issue with you and insist that you are liable for their inconveniences. They can even go as far as to set up booby traps for you to fall into and “blackmail” you into concessions. And there is a part of you which tells you that you are indeed liable as it is your property after all. Your best protection is to get familiar with legal requirements on being a landlord and play hard ball. Even so, you could still relent to a tenant’s demands.