In the world of real estate investment, there are numerous ways to make a profit and become financially independent. However, real estate investments are not without problems. Going into real estate investing comes with several challenges and they vary, based on the investment strategy you choose. If you plan on investing in residential based real estate, there are setbacks that you will most likely encounter from buying a rental property to managing it.
In this scenario, you being an investor in real estate also means that you are a landlord and it can be quite hectic. Anyway, you should not be discouraged from investing in real estate due to the problems it comes with. All you need is to know the problems that might arise and be prepared for them. Some of these hurdles are;
Financing
The foremost hurdle with buying a property to put up for rent is how to finance the property. Majority of landlords cannot afford an all-cash payment when buying a rental property. They most often have to get a mortgage while paying at least a down payment of 20%. This means, as a landlord, the bank will still receive your regular mortgage payments. Achieving success in real estate investing is important, you must have a steady source of financing your property or lose your property as a whole. To do this, ensure that your income in rents covers the mortgage payments and other expenses, such as vacancy, maintenance, repairs, property taxes, etc.
Property management
Property management is a part of real estate investing. As a landlord, it is important to ensure that your property stays in top condition and is ready to go up for rent to tenants. When you have tenants, be prepared to receive calls from them at odd hours due to faults, like a leaking pipe or broken cooling system.
Proper management is very important, especially when it has to do with residential based investment. Avoid waiting until problems pile up before you fix them. Resolve each problem as it arises to prevent it from worsening. You can also hire the services of professionals for effective property management.
Tenants
As a landlord, you cannot avoid interaction with tenants. Although it is not that big a deal, it can be a problem for a landlord that is not used to working or interacting with people, most especially people who have a habit of incessant complaints and constant demands. However, this cannot be ruled out, as it is the way things are in residential based real estate investment. All you need to do is to be patient and relate to the tenants accordingly.
Over the top vacancy rates
One major setback in becoming a landlord and having to manage a property has to be having a high rate of vacancy in your rental property. This is a bigger challenge compared to having to interact with tenants. Your vacant income property would make you lose money because you must make the mortgage payments, maintain the property, pay taxes while getting no rental income whatsoever.
This will adversely affect the real estate investment because it will only lead to a negative flow of cash, with a lot of money going out and none coming in. You can prevent this by ensuring that the rent you charge is not too expensive for the type of property or its location. Sometimes, all you have to do is change your rental strategy which will, in turn, reduce your vacancy rate.
Low income
There are several ways of making money when it comes to real estate and one great way is by being a landlord. Although, ownership and management of an income property will not always yield as much on the investment as you would like or hope for. Sometimes, you might have a low or negative cash flow.
There might also be insufficiency in your cap rate. The main challenge when it comes to real estate investment as not making sufficient money. You can fix this by either boosting rental income or reduce your expenses in repairs and professional service and also consider tax deductions.
In conclusion
Owning any property and managing it will never be a smooth ride. In reality, investing in real estate and becoming a landlord will come with various hurdles and challenges. Some of which might seem discouraging. However, you should not let these stop you from investing in real estate as these hurdles, can be solved quite effortlessly with proper planning and strategy in place.
If you plan on investing in real estate, you should be well prepared to encounter challenges and plan ahead. You should make proper research before going into investment and get expert opinions before making major decisions. You need any help in real estate investment? Pumped On Property Brisbane is your best bet.
