Absentee Owners: Pros and Cons of Being an Absentee Owner

Absentee owners are individuals, corporations, or real estate investment trusts (REITs) that own residential or commercial real estate without residing in or managing the property. Real estate professionals use this term to describe off-site passive landlords who have outsourced the managing duties of their property to a property management company or another third party. They refer to a property with an absentee owner as a non-owner-occupied property. The absentee owner typically holds a different mailing address or primary residence than their investment property address.

Absentee property owners are more likely to be motivated sellers than hands-on property owners, which is why real estate investors and real estate agents often seek them out as business leads. Real estate professionals may even search tax records, look up owner data on vacant homes, or peruse vacation rental sites to create a list of absentee owners to contact for real estate investment opportunities.

There are many reasons why some properties are under absentee ownership. Some use absentee ownership as an investment opportunity, and others become absentee owners out of circumstance.

• Inherited property: An heir may come into property ownership through inheritance, so they may have less emotional attachment to the property than the original owner. The heir may want to collect passive income on the property, outsourcing rent collection and management duties to a third party (like a management company or a superintendent).
• Investments and passive income: Some real estate investors will buy properties then hire a property manager to handle maintenance, leasing, and tenant relations. The house remains in the owner’s name, and they can profit from the rent.
• Management fatigue: A property owner may lose interest in managing the rental property due to excessive upkeep, budget restrictions, or difficult tenants. This type of absentee owner is often a motivated seller, so real estate investors will find their contact information, like their phone number, through public records or through the local tax assessor to make an offer on their property.

There are many reasons that a person might choose to be an absentee owner for one property or multiple properties. Here are some of the potential advantages:

1. 1. Freedom: Being an absentee owner of a property means that you don’t need to live in the same location as your property. Some absentee owners don’t live in the same state as their investment property. Absentee ownership gives a landlord freedom to travel and live in different locations while still collecting rental income on their passively managed property. Absentee homeowners can continue acquiring rental properties without being physically present.
2. 2. Owning multiple properties: Absentee landlords may own various investment properties in different places. They can hire property managers to run these properties, freeing up their time and resources to scout new properties and generate more revenue.
3. 3. Passive income: Owning a property passively gives the absentee owner an easy source of passive income. They can pay a management company to take on the burdens of managing tenants, collecting rent, and performing routine maintenance on the building.

Being an absentee owner may sound attractive if you like freedom and passive income, but there are some potential disadvantages to this arrangement:

1. 1. Property management costs: An absentee owner will often need to hire a property manager to run the property, which can be costly. While the property manager will do most of the work, such as maintenance and putting up rental listings, the absentee owner will need to consider the cost of hiring a manager, which cuts into the total cash flow that the owner receives.
2. 2. Lack of control: If you are an absentee owner hiring a property manager to run your building, you cede your control over the maintenance and care of your investment property. A poor property manager or difficult tenants may damage your property, resulting in costly repairs and decreased home value.
3. 3. Less awareness: Absentee owners usually don’t live in the same area as their property, making them less able to track the local market to see whether housing prices are rising or falling. If an absentee owner has multiple market properties they manage from afar, they may not know the best time is to sell.

All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.

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