Four of the Biggest Pitfalls with Rental Property Investment

  1. The Money Pit. Sometimes you just buy a “dud”. In every market, in any neighborhood,with any company, there are problem properties. This can be due to a consecutive string of problem tenants, large unknown maintenance issues that lay below the façade of a pretty house, or bad luck with choosing the wrong property manager. Sometimes you can’t anticipate all of the unfortunate circumstances that can befall a property. Multiple properties and a diversified portfolio are the only solution to this pitfall.
  2. The Bad Provider: Whether it’s a turn-key rental investment company or a property management operation, this can be the absolute WORST downfall with a rental property. Spend plenty of time searching for the BEST vendors, or pay the consequences later.
  3. Low Reserve or No Reserve: They say it’s not a question of “if” you’ll have maintenance expense but “when”. It’s important to hold enough cash in reserves to plan for that unexpected move-out or unforeseen plumbing leak. A great insurance provider can also be the saving grace to offset for this risk.
  4. Wrong Area: This is a difficult one. If you buy a rental property in an entirely rental area, it could be a “war zone” or a place with a crime rate that keeps you up at night. On the flip side, if you buy in an “owner zone” there is likely to be little to no rental demand. It’s important to hit that sweet spot where solid capital appreciation meets blue collar rent payers.

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