What the owner
An owner is an individual or a business that owns real estate and rents or rents the property for money to another party. The tenant is called a tenant. The owners generally provide the necessary maintenance or repairs during the rental period, while the tenant is responsible for the cleanliness and general maintenance of the property.
The owners invest in real estate as a source of financial profit. The monetary benefits of a homeowner include a steady stream of monthly rental income, as well as owning real estate that has the potential to appreciate in value. Owners have specific rights and responsibilities that vary from state to state, however, there are general laws common to all states.
The owners have the right to collect the rent, as well as the pre-established late fees. They also have the right to increase the rent as defined in the tenant-owner lease contract. When tenants do not pay rent, the landlords have the right to evict them. The expulsion process also varies from state to state. Most states offer homeowners the option to collect rent as well as legal fees.
Landlords are responsible for maintaining their rental properties in a habitable condition, managing security deposits and ensuring that a property is clean and empty when a new tenant moves in. The homeowner must also follow all local building codes, make quick repairs and keep all vital services, including plumbing, electricity and heating, in working order.
The management of security deposits is also an essential obligation for any owner. Although the owners have the right to charge the tenants a security deposit covering both property damage and unpaid rent, the deposit never really belongs to the owner. Rules and laws governing the amounts of security deposits and how they should be maintained. These rules vary from state to state. Homeowners who break these laws could face legal consequences.
Pros and Cons of Owning
Homeowners have financial advantages and disadvantages when investing in a rental property. Among the advantages, an owner can mobilize borrowed funds to buy a rental building, thus requiring a smaller part of the total cost of the building, to obtain rental income from the structure. The rental property can guarantee this debt, thereby freeing up other assets belonging to the owner.
In addition, most of the costs associated with rental properties are tax deductible. If there is no net profit after expenditure, rental income is essentially non-taxable income. As the rental property mortgage is paid off, owners increase their ownership percentage of their property and have access to value appreciation.
However, when a landlord sells property, he will pay taxes on any capital gain, unless he transfers the money to another rental property. This process, called exchange 1031, has specific requirements. The new property must be identified within 45 days of the sale and the full transfer must take place within 180 days.