As a stock market investor or real estate investor, you might be seeking passive rental income. In that case, you’ll probably want to be an absentee landlord who doesn’t live on or near the rental property.
What is an Absentee Landlord?
An absentee landlord is one that doesn’t live on or near the rental property. For example, if you own an apartment complex but don’t live at the complex, you’re an absentee landlord. But, if you own a rental house and you live in a house within walking distance of rental house, you’re not an absentee landlord. Usually, when we think of an absentee landlord, we mean someone that lives at least a few miles away from the rental property.
What are the Responsibilities of an Absentee Landlord?
Unlike the stock market, where investors have no responsibilities, an absentee landlord has the same responsibilities as any other landlord. Absentee landlords must:
- Maintain the property in good condition
- Comply with building, housing, and health codes
- Comply with all federal, state, and local landlord-tenant laws
- Perform repairs and maintenance
- Collect rent
- Pay any expenses related to the landlord business
With absentee landlords, since they don’t live on or near the rental property, there’s a much higher risk of legal liability for issues such as negligence. That’s one reason landlord insurance is especially important for absentee landlords.
To minimize the work required to be a landlord as well as reduce risks, absentee landlords often hire property managers or property management companies to oversee their rental units for them. This reduces the work required of the landlord, but it also reduces profits.
Advantages & Disadvantages of an Absentee Landlord
There are several advantages and disadvantages to being an absentee landlord. For example, if you want to own multiple rental properties over a wide geographical area, you must be an absentee landlord for at least some of your properties. That’s because you can’t be everywhere at once.
If you want to earn passive income, you’ll need to be an absentee landlord. That’s because even if you hired a property manager, if you live on the property, tenants will approach you whenever they have an issue. Of course, that defeats the purpose of having a property manager.
Sometimes, the highest yields come from lower-income properties. But you may prefer not to live in a low-income neighborhood. As an absentee landlord, you don’t have to live near your rental properties.
Some disadvantages of being an absentee landlord include:
- Difficulty monitoring the property
- Higher risk of liability for failure to meet your landlord responsibilities
- You may need to hire a property manager
- If you need a property manager, that’s an additional cost that will reduce your rental income
If you want the flexibility to invest in multiple rental properties across a wide geographic area, you’ll need to be an absentee landlord for at least some of your properties. If you’re looking for passive income, you’ll need to be an absentee landlord.
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