Renting for an income in Tenerife may not be without pitfalls.
Tenants worldwide dream of becoming homeowners, and some homeowners dream of becoming landlords – expanding their real estate ownership while someone else pays the bills. This dream is not hard to realise, but that doesn’t mean it is without pitfalls and easy-to-make mistakes .With hard work (which you’ll have to do yourself unless you use the services of an agency) and knowledge/expertise being a landlord can be a fast track to passive income and wealth accrual.
A common mistake is that whatever the bank says they’re willing to lend, borrowers typically take their highest offer. While this mistake may not cripple you with your home mortgage, over-leveraging your rental properties is a drastically different story.
With rental properties you have far less control over the associated expenses. For example, if you own five rental properties, and suddenly three of the tenants decide to move – or worse, just stop paying their rent – you will suddenly find yourself with not only your home mortgage, but three additional mortgages to pay. If that isn’t bad enough, you will also be faced with eviction costs, repair and maintenance costs, advertising costs, etc. As a general rule, you want your predictable monthly expenses (mortgage, taxes, insurance, legal entity fees, ground rents, etc) to be no more than 50% of your collectable rent. This is why many people use a rental agency, it takes away the daily grind of looking after the properties..
Most landlords simply want the perfect tenants to show up, sign a rental agreement, then pay their rent on time all while keeping the rental property in pristine condition, this rarely happens. Most rental applicants aren’t going to follow this route, again another reason for using an agent with experience to “sniff out” a potential bad tenant
Remember that if a tenant call you to voice a concern, you must listen to them, and then address their concerns immediately (even if that means telling them “no”). If they call to request a repair, send a contractor to the property to assess the cost and seriousness of the problem, and then call the tenants immediately to give them a definite answer on whether and when you will address the problem. Again an appointed agent would handle this for you.
Left unheeded, these small problems and disputes can become major damage to your rental property, or a lawsuit that wastes your time and money. If you haven’t got the required discipline to take care of these matters, then appoint an agent as the normal fee of 10% (normally paid by the tenant) is worth it. We have all heard tales of woe from tenants and landlords and Tenerife is not immune to these problems, but with careful consideration, you can accrue wealth from property investment and lettings.
