Property investment can be profitable, secure, and personally rewarding. But, just like other investments, things could go wrong. Even if investment property has many benefits, liability and risk can scare away investors. Fortunately, there are many ways to mitigate the risk of rental property investing. Read on to know the major risks of investing in rental properties and how to best mitigate them:
You Lose Money Instead Of Making It
Any form of investment is aimed at making money which means getting a good return on investment from your property. But, you may end up with bad returns. To mitigate this risk, you must do an investment property analysis. This will help you purchase a profitable investment property. An investment property analysis reveals the rental income and the rental expenses you can expect, which may indicate future profitability.
You Struggle To Find Tenants
Vacancies cause a negative cash flow since the property is a liability when it doesn’t work for you. You can mitigate this risk by doing proper marketing. This is one of the reasons it makes sense to partner with a Thousand Oaks property management company. The company knows how to market your property effectively by using both online and offline platforms. It can make your property visible to a pool of quality tenants. Property managers are real estate experts and know how to make your property look more appealing to tenants.
You End Up With Non-Paying And Irresponsible Tenants
Having bad tenants is a nightmare for every landlord. This will have you paying for damages these tenants cause, eventually resulting in negative cash flow. You can minimize this risk by doing tenant screening before letting them move into your property. A comprehensive screening process involves income verification, criminal background check, credit check, and rent references. Property managers will take the time to contact previous landlords and ask about the tenant and their previous residency.
The Property Depreciates In Value
What makes real estate an attractive type of investment is the ability to increase in value. Real estate investors purchase a property and hope it will increase in value over time. However, if the property depreciates, it is a loss. Mitigating this risk involves studying the location or doing a real estate market analysis. You must analyze the area’s appreciation rate based on historical data. This can help you find places where properties gain value over time.
Another way to mitigate the risk of depreciation is to get an idea of how much to expect in rental income. You can come up with such an expectation by comparing your property with other investment property in the same area.
Sometimes, the most important thing you can do is to work with experienced professionals to support your financial ventures. The rental industry requires knowledge, experience, and connections. That is why you may want to consider hiring important parties such as a realtor who has investment experience and a property management firm. Realtors possess the industry knowledge and inside connections necessary so you can find the best deals. Meanwhile, experienced property managers will make sure you get a good return on your investment.