The idea of becoming a landlord is appealing, you invest in a beautiful property, house tenants and collect additional monthly income.

The idea seems easy, particularly to those who are having troubles selling their homes or looking for additional properties to add to their list of investments.

What’s the catch?

The idea is easy but the decision to become a landlord should be carefully considered and researched before investing.

An important thing to consider is what are the costs of being a landlord, the costs that go beyond the initial investment?

These costs of being a landlord include:

  1. Insurance Costs
  2. Maintenance Costs
  3. Taxes
  4. Legal Costs
  5. Administration Fees.
1. Insurance Costs

Insurance costs are ones that many people forget to consider.

The decision to become a landlord and rent out your property switches your title from homeowner or primary occupant to investor.

This change in your status then leads to an increase in your insurance rates as it is more expensive to insure a home under a landlord insurance policy.

Due to this change, it is important to take this additional cost into account when budgeting your finances and evaluating your profits from rent payments.

2. Maintenance Costs

Maintenance is a vital part of being a landlord and goes beyond the initial property fix up to attract ideal tenants.

As the landlord you will incur any costs needed to fix the property prior to tenants moving in and costs to maintain the property throughout their stay.

This is important when considering what are the costs of being a landlord.

  • Additional costs can include:
    •  Fixing or replacing appliances
    • Painting
    • Cleaning
    • Property damages

And more!

As a landlord, you can request your tenants to pay a security deposit when signing the lease in order to cover any damage that the tenant may cause throughout their stay.

Important Note:

The security deposit will not cover any other expenses in which the landlord is responsible for. If the tenant doesn’t cause any additional damages, the security deposit is returned at the end of their lease.

3. Tax Increase

Remember, when you become a landlord your status changes from homeowner or primary resident to investor.

This change in status also affects your taxes; as an investor tax breaks are no longer applicable to you and the tax on your property may increase.


If you decide to sell the property there is a tax rule that applies and may affect you.

The tax rule allows people to keep at least $250,000 of their profit from the sale tax free; as an investor this rule may no longer apply to you.

In order to claim this tax break, you will have had to live on the property for a minimum of two years out of the last five years.

4. Legal Costs

The costs of being a landlord are not only in the initial stages but throughout as well. This is the same for legal costs.

As a landlord you will need to seek legal advice to obtain more information on your rights as a landlord and draft your rental agreement.

Once you become a landlord and start hosting tenants, you also risk the legal costs associated with evicting your tenant if needed.

5. Administration Fees

In order to avoid additional costs from all the above that come with hosting a problem tenant (damages, eviction, etc.) we recommend taking the extra time and money in order to set up a secure tenant application process.

  • What is the best tenant application process to follow?
    • Interview the tenants
    • Get a background check which includes their credit scores and criminal record
    • Check references including previous landlords

Why it matters:

This process helps eliminate tenants that are more likely to cause issues and increase your costs of being a landlord.

Although there will be administration fees associated with obtaining the background checks, it is a small expense to pay in order to secure an ideal tenant and avoid any additional costs in the future.

That is the complete list of the top 5 costs of being a landlord.

As you can see, it is not necessarily cheap to become a landlord and it goes beyond the extra income from rent payments.

But, becoming a landlord is essentially running a business, it requires work, time and help but if managed effectively from start to finish, it can be very rewarding!

But, if the rewards don’t seem to be enough to make being a landlord worth it to you may ultimately decide it isn’t worth the hassle to own a rental.

If that sounds like you and you’re thinking, “I want to sell my house fast“, you’re in luck!

We buy houses in the Los Angeles and we buy houses in orange county. So, anywhere in Southern California, we are who you should call to receive a cash offer on your home.

Get Your No Obligation Offer in 24 Hours or Less!

Give us a call at (310) 928-9688 or fill out our form to get started.