• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

The pros

While being a landlord can be a lot of work, the time and money investment does have some serious appeal. Rental properties are assets that generate monthly income and can allow you to benefit from any price appreciation in the long term.

Rent prices went up an average of 5.45% over the last year – and over 30% in some New York and Florida towns, according to a SmartAsset study that looked at rent prices in over 1800 U.S. cities. And with 93% of single family homes being currently occupied, demand for rental units is high. This means you could be more likely to have your pick of prospective tenants and get your unit filled in a shorter amount of time.

More: 36% of millionaires say it’ll ‘take a miracle’ to retire amid rising costs and a shaky market — WiserAdvisor can help you get on the right track even if you don’t have $1 million in the bank.

If you decide to sell the property and having the rental unit may add appeal for prospective buyers.

Whether you sell the property or you have that extra monthly income coming in, the extra cash can be part of your retirement nest egg or provide you with the cash to invest to further build your portfolio or even buy your next home.

Trading Tips for All Levels: Avoid These 5 Expensive Mistakes

Don't let costly errors derail your trading success. Learn about the five most expensive mistakes in options trading and how to avoid them, whether you're just starting out or have years of experience. Enhance your trading strategy today and stay ahead of the game!

Learn More

The cons

But it’s not all fun and games being a landlord, as the young Reddit poster discovered.

This is particularly true if you end up with tenants who fall behind on rent. Roughly 13.7% of American adults who are currently renting are in this position, according to a 2023 study from LendingTree.

If your rental income is helping to cover the mortgage on the property, make sure you have savings or an emergency fund set up to make the monthly payment if your tenants are late with rent.

Even experts like Dave Ramsey have warned that being a landlord can feel like you’re on a “crazy train”. On a recent episode of the Ramsey Show, he advised one caller — a frustrated property manager — to, “take a break from crazy. go get you a house.”

More: With Arrived, you can use $100 to cash in on prime real estate.

If you have a renter who doesn’t pay for months on end, you’ll have to evict them – and you wouldn’t be alone. Over 1 million evictions have been filed by landlords in the US over the past 12 months, according to data from The Eviction Lab.

Renter rights vary from state to state so you’ll need to do your research before embarking on this venture to know exactly what you might have to deal with in a worst-case scenario.

For example, California has an eviction process that takes a minimum of 30 days. One California couple made media waves after they reportedly lost $15,000 trying to get their problem tenant out. You also may need to take your tenant to court if they don’t comply with your eviction notice, adding more time, money and stress to the process.

Investing alternatives

If you have come to the realization that the hassle that can come with tenants isn’t worth the possible payoff, buying a home or rental property isn’t the only way to invest in real estate.

One option is a real estate investment trust (REIT) is a lower-cost and lower-risk way to benefit from the renting boom. REITs are publicly traded entities that own and operate residential and commercial properties that generate income. A percentage of the profits are then distributed to shareholders in the form of dividends.

If you are looking to dip your toe into real estate, there are also crowdfunding platforms which allow individual investors to buy fractional shares of bigger property deals. This option can offer very affordable minimum investments, similar to investing in mutual funds or REITs as well as larger investment opportunities for accredited investors.

You can also consider exchange-traded funds (ETFs), which offer investors the opportunity to invest in a preselected basket of securities. There are many real-estate options to consider including giants like Vanguard Real Estate ETF (VNQ) and the Real Estate Select Sector SPDR Fund (XLRE).

More: Start investing in real estate ETFs commission free with Robinhood.

While ETFs and REITs are relatively easy to buy and sell on major exchanges, it’s worth noting they come with a fee — referred to as the management expense ratio (MER) — which is charged in exchange for managing the fund.

If you think taking on the mantle of landlord is too much, you have plenty of accessible options to build the real-estate portfolio of your dreams.

Sponsored

This 2 Minute Move Could Knock $500/Year off Your Car Insurance in 2024

Saving money on car insurance with BestMoney is a simple way to reduce your expenses. You’ll often get the same, or even better, insurance for less than what you’re paying right now.

There’s no reason not to at least try this free service. Check out BestMoney today, and take a turn in the right direction.

Sabina Wex is a writer and podcast producer in Toronto. Her work has appeared in Business Insider, Fast Company, CBC and more.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.