When a landlord resides in a rental property, it is known as an owner occupied landlord. Many times, landlords do not actually live at their rental properties. When a landlord owns a rental property, but lives at a considerable distance away from the rental, usually outside of the rental property’s local economic area, they are often referred to as an absentee landlord. Sometimes the landlord’s primary residence is not even in the same state as the rental property.
Absentee landlords are not landlords who come to their property once a week. These landlords are those who are almost never seen. They may make an appearance every few months, or not at all. It is common for landlords with vacation rentals, landlords who own large multifamily complexes or commercial property landlords to be absentee landlords.
Benefits of Being an Absentee Landlord
There are certain advantages or being located far from your rental properties. These include:
- Tax Deductions for Rental Related Travel- Depending on how far you live from the rental property, traveling to the property can be expensive. However, landlords are allowed to deduct business-related travel expenses on their taxes, which can help ease the burden.
- Diversify Rental Portfolio- Do not put all your eggs in one basket. Even if your business is real estate, there are ways to diversify within the business, such as investing in different locations. A hot rental market will help offset another rental property where the rental market is sluggish.
- Hire Property Manager for Daily Obligations- You can hire someone else to manage the day to day operations at the rental property. You need to thoroughly screen any prospective property manager to make sure you choose the right one.
Risks of Being an Absentee Landlord
There are many problems that can come up when you are not monitoring your rental property on a frequent basis.
- Miss Potential Maintenance Issues- One of the greatest risks of being an absentee landlord is not keeping up with the required maintenance obligations at the rental property. This includes spotting potential problems before they become big issues, such as:
- Roof leaks
- Plumbing issues
- Garbage or other debris inside or outside the rental property
- Overhanging trees or pest problems
- Keeping up with routine maintenance and repair requests
- Neglect Property Maintenance- The property could start to show signs of neglect. The grass may not get cut, leaves will not be raked up and snow will never get shoveled. Broken fences, deteriorating siding, crumbling porches, and missing shutters are other obvious signs of neglect.
- Miss Potential Tenant Issues- Another major point of concern is managing your tenants from a distance. When you are not hands-on, you will have to rely solely on your property manager or hope that your tenants are not breaking the rules of their lease. It can be easy to miss early warning signs of problem tenants such as:
- Property damage
- Late rent payments
- Drug dealing
- Other misuse of the rental property
- Unaware of Neighborhood Trends- When you are not actively involved in the rental property, you may be unaware of what is happening in the surrounding rental market. The neighborhood may be heading for a decline due to an increase in crime, vacant properties or closing businesses. Due to this lack of involvement, you may not be able to sell your property before property and rental values take a hit.
- Cannot Vote in Local Elections- Another disadvantage of being an absentee landlord is the inability to vote in local elections. You will be responsible for following the rules of the town but will have absolutely no say in deciding the laws.
- Vulnerable to Break-Ins and Squatters- This is especially true of vacation rentals, which may be unoccupied for a portion of the year. Your property will be susceptible to individuals entering the home, causing damage and potentially living in the property without your knowledge. Installing a security system is one way to reduce these odds.
Absentee landlords have the exact same responsibilities as any other landlord. They must follow the landlord-tenant laws of the state where their rental property is located. Examples of landlord responsibilities include:
- Making Sure Property Conforms to All Building and Safety Codes
- Addressing Health and Safety Violations Promptly
- Responding to Repair Requests Promptly
- Providing Access to Utilities
- Maintaining Common Areas
- Providing Proper Trash Containers
- Giving Proper Notice Before Entering Tenant’s Unit- Usually 24 to 48 hours.
- Returning Security Deposits According to State Law
Tenants have many rights that are protected under landlord-tenant law, these include:
- Property That Conforms to Certain Health and Habitability Standards
- Access to Utilities, Including Running Water
- Rights to the Collection, Storage, and Return of their Security Deposit
- Only Lawful Deductions From Their Security Deposit
- The Quiet Enjoyment of Their Rental Unit
- Freedom From Hazards Such as Mold, Asbestos and Lead Paint
- Freedom From Pest or Rodent Infestations
Tenant Remedies for Absentee Landlords
If a landlord is breaking any rules of the lease, the tenant should first notify the tenant of the issue in writing. If the landlord does not respond to the issue in a timely manner, the time-frame will differ based on your state law, the tenant has a right to file a complaint against the landlord.
An inspector may come out to the property and if an issue is found may serve the landlord with a health or safety violation. The landlord may have to pay a fine and will have a certain number of days to fix the violation. The landlord may have to go to court to pay the fine, to fight the violation or to appear in court for failure to fix the issue.