Becoming a landlord in Los Angeles can be incredibly rewarding, but it’s not easy. The City of Angels has a diverse real estate market that offers plenty of opportunity and potential, but you need to know what you’re doing and have the right team supporting you.

If you’re considering becoming a landlord in Los Angeles, keep reading. We’ll cover whether it’s worth becoming a landlord and what you should know before taking the plunge.

Yes, But Be Prepared

Everyone loves the idea of earning “passive” income from rental properties , especially in a city like Los Angeles where rental demand is high.

With the right property in the right location, you can enjoy a consistent stream of income alongside an investment that may even appreciate over time. Also, owning a rental property can be a great way to diversify your investment portfolio, providing both short-term income and long-term capital gains.

However, the role of a landlord isn’t just about sitting back, collecting checks (or direct deposits), and watching your bank account grow.

It requires time, effort, specific knowledge, and a certain level of resilience to overcome the hurdles that are bound to arise throughout years of tenancies. You’ll be responsible for maintaining the property, addressing tenant issues, and ensuring compliance with local laws and regulations. It’s a role that requires a hands-on approach or, at the very least, a willingness to manage those who handle the hands-on work for you.

Things to Consider Before Becoming a Landlord in Los Angeles

Before jumping into the rental market, it’s important to take a step back and assess whether you’re truly prepared for the challenges ahead. Here are some key considerations to keep in mind.

Can You Afford It?

One of the first questions you should ask yourself is whether you can afford to be a landlord. While owning a rental property can be profitable, it also comes with financial risks. What happens if a tenant stops paying rent or if unexpected repairs are needed?

Many would-be landlords are often looking for guarantees—assurances that tenants will pay on time, abide by the rules, and leave the property in perfect condition. Unfortunately, there are no guarantees in real estate. It’s crucial to ensure you’re not over-leveraged financially. If one hiccup, like a missed rent payment or a costly repair, could cause serious financial strain, it might be worth reconsidering your decision.

Having a financial buffer in place is vital. This means having enough savings to cover mortgage payments, property taxes, insurance, and maintenance costs, even during times when the property is vacant or when tenants fail to pay on time.

What Type of Landlord Will You Be?

It’s also important to think about the type of landlord you want to be. Are you planning to be hands-on, managing every aspect of the property yourself? Or would you prefer to take a more hands-off approach, possibly hiring a property management company to handle the day-to-day operations?

Being a hands-on landlord means you’ll be directly involved in tenant interactions, maintenance decisions, and even the marketing of your property. This can be rewarding but also time-consuming and limiting because you’re forced to live nearby so you can keep an eye on things.

On the other hand, hiring a property management company can relieve you of many of these tasks and offer you more freedom, though it will come at a cost. Fortunately, the right property manager pays for itself – and then some.

Understanding your management style and the level of involvement you’re comfortable with can help you make more informed decisions about whether you should be a landlord, how to manage your property, and what resources you may need.

Understand Los Angeles’s Local Rental Laws

Los Angeles has its own set of rental laws that landlords must follow. These include rent control regulations, tenant rights, and eviction procedures. Familiarizing yourself with these laws is crucial to avoid potential legal issues.

For instance, Los Angeles has some of the most rigorous rent control laws, which limit how much you can increase rent and under what circumstances you can evict tenants. Additionally, illegal terms or incomplete leases may become unenforceable, removing your protections as a landlord. Violating these laws can result in hefty fines and legal battles, so it’s important to stay informed and compliant.

If the legal aspects of being a landlord seem intimidating, it might be worth consulting with a real estate attorney or a property management company that’s well-versed in local laws to ensure you’re on the right track.

Record Your Transactions

Are you good at keeping records? As a landlord, you’ll need to meticulously document all financial transactions related to your rental property. This includes rent payments, repair costs, and any other expenses or income related to the property.

Good record-keeping is important not only for tax purposes but also for managing your property effectively. You’ll need to keep accurate records to claim deductions on your taxes, such as depreciation and expenses. Poor record-keeping can lead to costly mistakes, missed deductions, or even legal trouble.

Consider using accounting software specifically designed for landlords, or hire a bookkeeper to help manage your finances. This will save you time and stress, especially during tax season.

Will It Be Worth Your Time?

Being a landlord isn’t just about managing a property; it’s about managing people. You’ll need to be comfortable dealing with tenants, especially when they’re stressed or unhappy.

Are you good at judging character? Are you prepared to address issues as they arise, follow up, and ensure that the work is done to your satisfaction? Being a landlord can be time-consuming, particularly if you’re managing multiple properties or if issues arise frequently.

It’s important to consider whether you have the time and temperament to handle these responsibilities. If you’re someone who gets easily stressed or anxious, it might be worth considering whether being a landlord is the right fit for you.

Consider Bringing in a Property Management Company

If the idea of managing tenants, maintenance, and legal requirements feels overwhelming, you might want to consider hiring a property management company. A good property management company can handle everything from vacancy to tenancy to renewal or re-leasing, both simplifying your responsibilities and adding value to your investment overall.

Some value-adding benefits of working with an experienced property management company include:

Minimizing the property’s market time by finding the right balance of affordability and fair market value for your rental price
Finding high-quality tenants with proven vetting strategies like background checks, income verification, and more to help solidify cash flow and minimize damages
Drafting ironclad leases that protect you while complying with local laws
Documenting the property’s condition to simplify security deposit recovery
Reducing maintenance costs through established vendor relationships
Providing timely repairs, including emergency maintenance, to keep tenants happy and prevent costly damages

While this service does take from your profit, it can also save you a significant amount of time and stress. It’s a trade-off that many landlords find worthwhile, especially those with multiple properties or full-time jobs that prevent them from dedicating the necessary time to property management.

Are You Comfortable With New Tenants Moving In?

It’s natural to feel a sense of attachment to your property, especially if you’ve lived there yourself. However, once tenants move in, it’s important to remember that the property is now their home.

Tenants have the right to personalize their space as long as they return it to you in the same condition they received it, minus normal wear and tear. If you’re not comfortable with this, being a landlord might not be the right choice for you.

How Will You Bring in New Tenants?

Finally, it’s important to consider how you’ll find new tenants when the time comes. Do you have a network of real estate professionals who can help, or will you be relying on Google and online listings?

Marketing your property effectively is crucial to attracting the right tenants. This might involve creating compelling listings, staging the property for photos, and using online platforms to reach potential renters. If you’re not confident in your ability to do this, you might want to consider hiring a professional to help.

Are you Ready to be a Landlord?

Becoming a landlord in Los Angeles can be a worthwhile investment, but it’s not without its challenges. It requires careful planning, financial stability, effective communication skills, and a willingness to navigate the complexities of property management. By considering the factors outlined above, you’ll be better prepared to make an informed decision about whether being a landlord is the right path for you.

If you’re ready, or if you need help managing your rental property, RentalHouse Property Management is here to assist. We offer a range of value-adding services to help you navigate the challenges of being a landlord in Los Angeles, from tenant screening to property maintenance and beyond.

Is It Worth Becoming a Landlord in Los Angeles?