Rental properties can be great investments for anyone looking for a consistent source of passive income. However, this isn’t to say that every rental property represents a slam dunk. In addition to purchasing properties that lack long-term profitability, many fledgling investors fail to manage their properties or their resources properly. Such rookie mistakes stand to cost you a lot more than your investments will make you. Property investors looking for ways to ensure a healthy ROI would do well to avoid the following missteps.
Assuming Emergency Funds Aren’t Needed
Even if a property is very new and/or exceptionally well-maintained, not planning for unforeseen emergencies is pure folly. Any property in which people reside is going to have the occasional maintenance emergency. Sometimes, these problems are purely the fault of tenant negligence. In the other instances, maintenance issues come about as a result of plain-old bad luck. However, regardless of why these issues arise, you don’t want to be strapped for cash when they do.
To help ensure that you’re never hard up for money in the event of a maintenance emergency, make a point of placing a portion of the income you earn from rent into an emergency fund every month. If you own multiple properties, each one should have its own emergency fund. Robust emergency funds can help ensure that any serious problems you and/or your tenants encounter are resolved in a timely and stress-free manner.
Failing to Hire a Dependable Maintenance Staff
To call property maintenance important would be an understatement. In the absence of a knowledgeable, responsive maintenance staff, property issues are likely to linger until they become costlier, more serious problems. Furthermore, if you consistently regard property maintenance as an afterthought, damage may well be done to your professional reputation. These days, dissatisfied tenants won’t hesitate to voice their grievances online – and if you and your properties accrue a fair number of complaints, many people will think twice before renting from you.
You can nip this in the bud by employing a thoroughly dependable maintenance staff. The individuals you hire should be well-versed in various types of maintenance and repairs and be capable of dealing with tenants in a courteous, personable fashion. You should also take any complaints tenants have about your maintenance staff’s attitude or professional expertise under careful advice.
Not Having Properties Inspected Before Purchasing
Purchasing a property without having it inspected can result in you getting stuck with a money pit. Even if a property is fairly new or appears to have been meticulously maintained, it’s in your best interest to have it thoroughly looked over by licensed building inspectors, plumbers and electricians. These individuals can provide you with an accurate assessment of the property, thus providing you with all the information you’ll need to make an informed purchasing decision.
There’s nothing inherently wrong with purchasing a property in an expedient manner. In fact, there are many good reasons why you should start investing early. However, committing to a purchase without a thorough inspection is never recommended.
Assuming a Property Will Always Have Tenants
You should never assume that a property will always have tenants. Even if it’s located in an in-demand area, there are a variety of reasons for which a property may remain vacant for long periods. Setting aside a little bit of money every month can help ensure that you’re able to maintain a property that’s between tenants. As is the case with emergency maintenance funds, you may never actually need to use this money, but as the adage goes, “Better to have it and not need it than need it and not have it.” Again, if you own multiple rentals, take care to set aside a separate fund for each one.
The right rental properties can net you a significant amount of passive income each month. Conversely, unwise property investments can act as a considerable drain on your finances. While some poor investments are easier to identify than others, it never pays to jump into an investment situation unprepared. Given how much money is at stake, investing in a rental property without doing your homework is extremely ill-advised. To increase your chances of seeing a healthy return on your next rental property investment, take care to avoid the mistakes discussed above.