What is an Absentee Landlord?
An absentee landlord, sometimes called an absentee owner, is an individual, corporation, or state entity that owns and rents out real estate but is not located on or near the property. Absentee landlords may live in a different city, state, or even country from the property(s) they rent out.
Due to their physical absence, absentee landlords commonly delegate property management responsibilities. This may involve hiring a property agent or management company to handle day-to-day operations, tenant relations, and property maintenance.
Typically these owners view their properties as long-term investments, seeking rental income and potential appreciation.
Responsibilities of an Absentee Landlord
Despite the physical distance, absentee landlords must ensure appropriate oversight of their properties, as well as the safety of their investment. This process involves making sure regular inspections occur to assess the property's condition, identify maintenance needs, and promptly address any issues.
Absentee landlords should familiarize themselves with legal landlord requirements and tenants’ rights in the cities, counties, and states where their property resides. This legislation can vary regionally.
Absentee landlords should prioritize clear communication channels between all parties so tenants can feel supported even without an on-site landlord. Doing so can also help guarantee that legal documentation makes it into the right hands at the right time, like signed rental agreements, maintenance requests that affect habitability, or eviction notices.
While property management companies can handle everyday operations and tenant needs, the ultimate legal responsibility lies with the property owner. Therefore, it is imperative that absentee landlords choose the right property management company.
Advantages of Being an Absentee Landlord
- Tax Benefits: Absentee landlords can tap into potential tax deductions like travel expenses incurred when maintaining or checking on the property, property management fees, and other eligible expenses.
- Flexibility: Absentee landlords have the flexibility to live in different locations or pursue other opportunities without being tied down to a specific property. This mobility can be advantageous for those with dynamic lifestyles.
- Investment Income: Retaining a property as an income-generating asset allows owners to continue ownership while benefiting from continuous property appreciation and its contributions to overall wealth building.
- Diversification: Owning properties in multiple markets can diversify a real estate portfolio. This diversification can help spread out risk and potentially increase overall investment stability.
- More Hands-Off Management: Absentee landlords can appreciate a hands-off approach to day-to-day property management. With a reliable property management company in place, they can focus on other endeavors without being heavily involved in the property's daily operations.
Risks of Being an Absentee Landlord
- Property Neglect: Absentee landlords face potential risks such as property neglect due to physical distance, leading to issues like maintenance problems and building code violations. Even when working with a property manager, absentee landlords should actively engage in communication and oversight and avoid over-reliance on delegated responsibilities for effective property management.
- Tenant Issues: Tenant-related problems, such as property damage, disputes, or lease violations, may occur without proper monitoring.
- Legal Obligations: Absentee landlords may be less aware of dynamic local ordinances, zoning regulations, and other legal requirements that could impact the property. This lack of awareness can lead to legal issues if left unaddressed.
- Market and Economic Changes: Absentee landlords may be less informed about local market conditions and economic changes that could impact property values and rental income. Staying abreast of market trends is essential for making informed decisions.