Becoming a Landlord: 3 Common Financial Questions

The process of becoming a landlord can provide you with some financial benefits. However, there are also some financial responsibilities involved. Here are a few common financial questions that most landlords want to know before getting involved.

1. How Much Cash Flow Can I Expect?

One of the most important things to determine before becoming a landlord is how much cash flow you could generate with a property. As a landlord, you want to know how much money you can expect in rent from your tenants each month. This will help you when determining how big of a property you can buy and whether or not you can afford to become a landlord. You need to start out by looking at other rental properties in the area and determining what the market rent is. This will give you a good price range for your calculations. If you cannot make the numbers work by using market rent, then you should consider looking at another property.

2. Are There Any Tax Benefits?

Many prospective landlords do not understand that there are some tax benefits available to them. There are several different things that you will be able to deduct on your taxes. For example, you can deduct depreciation on the property from your taxable income. This could be a pretty substantial deduction for you. You will also be able to deduct many different expenses as business expenses. You can deduct travel expenses to and from the property if you keep track of the mileage. If you make any purchases for the property, you can also deduct them as business expenses if you keep a receipt. You can deduct a portion of your maintenance expenses as well. If you spend any money to market the property when there is a vacancy, you can also count this as a business expense. Therefore, if you keep detailed records, you could potentially get some nice tax savings.

3. What Costs Are Involved?

One of the big drawbacks of being a landlord is the costs involved. There are many different costs that will pop up unexpectedly when you are a landlord. When you are dealing with tenants, many different things can happen. They might clog up the toilet and force you to call a plumber. They might put a large hole in a wall. Tenants typically do not take care of rental property as well as you take care of your own house. Therefore, you will have to come up with money at odd times in order to pay for repairs and maintenance.

If you are going to be a landlord, you need to make some sort of provision for these expenses. You need to set aside some money in an account that can be used for repairs and maintenance on your rental property. Otherwise, these expenses could eat into your personal finances and cause significant problems for you.

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