California rental properties

Home Ownership

Are you interested in generating rental income?   Are you convinced you can be a successful landlord?  Well, most Americans are ill-prepared to manage rental properties.  Below are the top 5 risks of owning rental properties:

Mortgage Debt:   Unless you are buying your rental properties for cash, then you still have the financial obligation of paying for a mortgage. So, even if you are unable to find suitable tenants with enough rent to cash flow the property, you still have to pay the mortgage on the property. You are also responsible for Federal, State and local taxes in additional to property insurance.

Repairs & Maintenance:  Unless you are buying a newly built home to use for your California rental, you need to allocate at least 10% of your rental income to the repair and maintenance.  From Westernization to gutter clean-up, rental properties require This is a lot of work specially if you don’t have help and are not handy with tools.   We have previously written extensively about the rules to decide when you need a property manager.   Maintenance requirements specially for older homes do justify hiring a property manager.

On Call 24 hours:   Managing a rental property is a 24 hour jobs.  In fact, you can not train your tenants not to call you when you are on vacation since repair needs will happen.  This means that if there are plumbing, leaks or roof repairs that could damage your rental property, then you need to dispatch someone asap to manage these repairs.

Where are the Good tenant:  This is easier said than done, but tenant screening is a huge task which is full of risks for small landlords.   This is yet another reason to hire a property manager.

Legal Contracts:  With the ever changing landscape of California laws, small landlords are ill-trained to handle these new laws.  For instance, with the legalization of Medical Marijuana, you will need to be careful about smoking restrictions in your rental units.  The sames goes for pets, firearms which requires specific language to protect yourself from huge liability if your tenant harms someone with their pet or guns.

Bottom line is that managing rental properties for income requires skills and time.  If you devote enough time and energy you can master it.   But if you would rather play golf in your retirement and play with grand kids, then you should hire a property manager.