Could You Turn Your Fire Damaged House into a Profitable Rental Property?
Many people today are interested in creating additional income streams. If you are the owner of a fire damaged house, that means you may be considering fixing it up and renting it out.
Renting property can be a great way to create a passive income stream that brings profits into your bank account each month. However, there are several issues you should consider before deciding whether or not to become a landlord and rent out a fire damaged house.
Is Becoming a Landlord Right for You?
Here are some skills and qualities a good landlord should have. Please read them and then consider whether you have these skills and qualities.
Good landlords are good communicators. They may use a real estate or leasing agent as a middle man but will be quick to answer questions or provide emergency maintenance if needed.
Attention to Detail
A good landlord asks tenants to sign a lease agreement and documents any extras in writing.
Can Do Maintenance Work
A good landlord makes sure a property is clean and in good shape. This is very important to tenants.
Yes as a good landlord you will need to provide customer service. Keeping your tenants happy will get you repeat business. That means you need to make sure repairs get done in a timely manner – you don’t want to become a “slum lord.”
Honest and Transparent
A good landlord will operate with honesty and transparency when dealing with tenants. Don’t cover up past issues. Instead let tenants know about them and promise to work with them should a problem reappear.
A good landlord understands the difference between normal wear and tear and genuine damage to property.
Able to Maintain a Healthy Distance
A good landlord stays a respectable distance from the property. You don’t want to be looking over tenants’ shoulders every day.
Of course, a good landlord should expect prompt payment of rent and so forth but in difficult circumstances a little bit of compassion can go a long way as well.
A good landlord trusts that tenants are doing the right thing until something happens to create distrust.
If you have the skills and knowledge listed above, then fixing up a fire-damaged house and renting it may be right for you. Before you make the final decision, here are some pros and cons to consider first.
The Pros and Cons of Renting a Fire Damaged Property
The pros of being a landlord include:
This is the main reason most investors decide to become landlords. Every month (provided you’ve selected good tenants who pay on time), you’ll receive cash you can use to pay bills or build wealth. One thing to keep in mind here: when it comes to having multiple rental properties it can be much more profitable to have multiple units in the same building or area as opposed to units all over town. Having units together can reduce management and maintenance fees.
As a landlord you may be able to take advantage of the following tax deductions:
- Replacing damaged furniture
- Replacing water pipes and disposal duct
- Buildings and contents insurance
- Accounting processes
- Cleaning and gardening
- Professional services
- Depreciation in the form of wear and tear (usually around 10% of the gross rental income)
By renting property you’ll have the security of consistent monthly income plus if your living situation changes you could always use the property yourself (so long as you uphold any contracts signed with tenants).
Being a landlord is like managing your own business, which can be very rewarding. You get to make the decisions on costs, contracts and terms, plus whether or not you want to sell your asset, and when. You’re the boss!
The cons of being a landlord include:
Despite the tax breaks we mentioned previously, you will still have to pay tax on any rental income and deal with the associated paperwork.
You’re in for the long haul
Landlording is a long term investment that costs you to get in and costs you to get out. When you do choose to get out, it may take some time to sell the property and release your assets.
Being a landlord can also result in additional costs that you may or may not be prepared for. These costs can include:
- Tax on rental income
- Gas safety certificate
- Energy efficiency certificate
- Repairs and maintenance
- Landlord insurance
- Furniture and decoration
- Leasing agency fees
Burst pipes, lost keys, broken boilers… all the household emergencies that could apply to you at home apply to your tenants, too.
Unless you employ a property management company to deal with this sort of thing (an extra expense), you need to be prepared to deal with panic-stricken phone calls at all hours of the day or night from tenants needing help.
You will also need to be up to speed on the latest property law and legislation affecting landlords, and also know where you stand when it comes to late rent payments, deposits and evictions.
A ‘Void’ is the period in-between tenancies when a property is not rented. These periods can quickly eat away at your profits.
If you minimize your void periods you will maximize your rental profits and create healthy positive cash flow from your rental portfolio. It really is that simple!
Many say you should expect to lose 10% of your annual rent in voids. I don’t buy this for one moment! By being proactive with your marketing you can shorten your voids and increase your profits. That means advertising a unit during a tenant’s last month – not waiting until they are gone to market it.
Is Renting Out a Fire Damaged House Right for You?
If so, we wish you the best of luck! If not, you may want to consider selling your fire damaged house to We Buy Fire Damaged Houses. We pay a great price – all in cash – so you get your money fast. Fill out the form below to see if your fire-damaged house qualifies for a free quote.