What Is a Landlord?

The term landlord refers to a property owner who rents or leases that property to another party in exchange for rent payments. Landlords can be individuals, businesses, or other entities. Landlords typically provide the necessary maintenance or repairs during the rental period, while the tenant or leaseholder is responsible for the cleanliness and general upkeep of the property. Specific duties and obligations of each party are normally outlined in a lease agreement.

Key Takeaways

  • A landlord is a person or entity which owns real property and then leases it out to tenants in return for rent payment.
  • A landlord can rent to either residential or commercial tenants depending on zoning restrictions and type of property.
  • Landlords and tenants are bound by a lease agreement, which is a legal contract specifying the rights and responsibilities of each party.
  • Being a landlord can generate passive rental income, but can also come with unforeseen costs and unique legal and financial risks.
  • Landlords are not allowed to discriminate (based on things like race or sexuation orientation), enter the property without proper notice, evict a tenant improperly, and raise rents without notice.

Understanding Landlords

As noted above, a landlord is anyone who owns property and rents it out to someone else. This party is called the tenant or leaseholder. Landlords invest in real estate as a source of financial profit. By owning property and leasing it out, a landlord can earn a steady stream of income along with the potential for appreciation of their properties.

Landlords may be individuals, businesses, or other entities, such as government agencies. Similarly, the types of properties they own can also vary. That means that the types of properties they own aren't limited to just homes. In addition to single-family residences, their real estate portfolios may include:

  • multi-family residential dwellings, such as multi-family homes, apartment buildings, and condominiums
  • land and empty lots
  • vacation properties, such as cottages and villas
  • commercial properties, such as standalone business properties, shopping malls, office buildings, or mixed-use buildings

Landlords typically use leases when they rent out their assets. A lease is a legally binding contract that outlines the terms under which one party agrees to rent property from another. It guarantees the lessee or tenant the use of an asset and guarantees that the lessor (the property owner or landlord) is entitled to regular payments for a specified period in exchange.

Special Considerations

There are some landlords who own property but aren't actually located on or near the property. These entities are called absentee landlords. Being an absentee landlord can be risky for the property owner. Damage or a complete loss due to negligence or tenant misbehavior is an ongoing worry. Squatting situations can also arise without adequately monitoring, and the eviction of tenants can be problematic.

Security deposit management is also a critical obligation for any landlord. While landlords have the right to charge tenants a security deposit to cover both property damage, as well as unpaid rent, the deposit does not ever actually belong to the landlord. Rules and laws governing security deposit amounts and how they must be maintained. These rules vary from state to state. Landlords who breach these laws could face legal consequences.

Landlord Rights & Responsibilities

Landlords have specific rights and responsibilities that vary from state to state, however, there are general laws, common to all states.

Property owners also have the right to collect rent, as well as any prearranged late fees. They also have the right to raise the rent as defined in the tenant-landlord lease agreement. When tenants do not pay rent, landlords have the right to evict them. The process of eviction also varies from state to state. Most states provide landlords with the ability to collect back rent as well as legal costs.

Property owners must:

  • responsible for maintaining their rental properties in habitable condition
  • managing security deposits
  • ensuring that a property is clean and empty when a new tenant moves in

The landlord must also follow all local building codes, perform prompt repairs, and keep all vital services, including plumbing, electricity, and heat, in working order.

Types of Landlords

Just as the types of properties a landlord can own can vary, so too do the types of landlords. They may be individuals, corporations, or other entities, such as government agencies.

Individuals may own one or more properties and rent them out to supplement their incomes or as a way to diversify their investment portfolios. For instance, a middle-aged couple may decide to purchase a second home and rent it out as a way to increase their monthly income, Keeping the property rented out during retirement can help these individuals supplement any money they receive from Social Security benefits or other investments.

Other landlords, such as corporations, may actually be in the business of purchasing properties for the express purpose to rent them out. For example, a real estate corporation may purchase office buildings and rent them out to different businesses for monthly rent.

Municipal governments, especially those in large cities, often own housing corporations. These agencies own, rent out, manage, and maintain affordable or subsidized housing rentals to those in need. Rental payments are commonly determined based on a tenant's income for these dwellings.

Advantages and Disadvantages of Being a Landlord

Landlords have financial advantages and disadvantages when investing in a rental property.

Among the benefits, a landlord may leverage borrowed funds to purchase a rental property, thereby needing a smaller portion of the total property cost, to gain the rental income from the structure. The rental property can secure this debt, freeing up other assets belonging to the landlord.

Most costs associated with rental properties are tax-deductible. If there is no net profit after expenses, rental income is essentially un-taxed income. As the rental property mortgage is paid down, landlords increase their ownership percentage of their property and gain access to the appreciation of value.

However, when a landlord sells a property, they will pay taxes on any capital gains unless they roll over the money into another rental property. This process, called a 1031 exchange, 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.

Advantages of Being a Landlord
  • Use of leverage to purchase the property

  • Tax-deductible costs

  • Income stream

  • Potential for appreciation

Disadvantages of Being a Landlord
  • Various responsibilities of maintaining and managing the property

  • Taxes on capital gains

  • Tenant-related hassles

  • Unforeseen costs

  • Unique legal liabilities

Special Considerations

In 2019, Oregon became the first state to implement statewide rent control, placing a limit on rent increases and limiting a landlords' ability to remove tenants without cause.

Landlord FAQs

What Are Things a Landlord Cannot Do?

Here is a list of four main things a landlord isn't allowed to do:

  1. Discriminate: Thanks to the Fair Housing Act, the law strictly forbids landlords from denying a lease to someone based on: race, color, national origin, sexual orientation, familial status, disability, or gender.
  2. Enter without proper notice: Unless it's for an emergency situation such as a fire or leak, landlords must give proper notice before entering a property. Laws vary by state, but many statutes require at least 24-hour notice.
  3. Evict tenants improperly: A landlord may evict a tenant for several reasons, but they must always go through the proper legal channels. Failure to follow proper protocol puts the landlord in a precarious legal position.
  4. Raise rents without notice: Landlords must give ample notice before increasing a tenant's rent (typically that means a minimum of 30 days). And depending on the state, rent control laws might prevent landlords from raising rents above a certain limit; even when the lease is up for renewal.

How Can You Become a Landlord?

You don't need a specific license, degree, or certification to be a landlord. When you purchase a rental property, you essentially become the landlord. That said, it makes sense to learn about landlord-tenant laws, state regulations, and property management best practices in order to run the property as headache-free as possible.

How Much Notice Does a Landlord Have to Give a Tenant to Move Out?

In most states, landlords must give a tenant 30 days' notice to end a month-to-month lease.

What Does Landlord Insurance Cover?

Landlord insurance generally covers three types of losses:

  1. Property damage: Damage to the home due to perils like fire, wind, hail, or snow.
  2. Liability: Protects the landlord legally if a tenant is injured on the property.
  3. Loss of rental income: If the property can't be rented out due to covered damage, landlord insurance may also cover the loss of rental income.

How Long Does a Landlord Have to Make Repairs?

Landlord-tenant laws vary from state to state. But generally speaking, a landlord has three to seven days to fix critical issues (such as no heat or running water) and 30 days for less serious problems.

How Do I Report a Landlord For Negligence?

In most cases, you must first notify the landlord of any issue(s) before you file a complaint. If there is no response or the landlord doesn't rectify the situation, you may file a complaint with:

How Much Can a Landlord Raise the Rent?

The amount a landlord can increase the rent depends on local laws. In areas without rent control, there's no limit to how high a landlord can raise your rent.