It’s easy to see why rental property ownership is such an appealing prospect for so many budding real estate investors. After all, properties in popular areas often generate immense monthly profits for their respective owners. However, simply investing in a property isn’t enough to guarantee success. Failure to put in the work and do your research beforehand stands to result in far-reaching financial consequences and serious buyer’s remorse. So, if you want your first rental property investment to be a smashing success, take care to avoid the following mistakes.
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Limiting Your ScopeÂ
By only investing in properties in your area, you’re essentially limiting the amount of passive income you’re able to generate. Depending on where you’re based, rental property investments may not represent a particularly profitable venture. This is among the reasons it’s important to seek out properties in areas with high median income, ample housing demand and low crime, even if this means branching out into different cities, townships or states.Â
If you’re unclear on which areas you should be looking to invest in, do some research online or consult with the seasoned experts at a real estate investment company. In addition to educating you on the best areas in which to invest, these individuals will be able to provide you with some invaluable pointers on how to invest in real estate online.Â
Not Having the Property Inspected by Knowledgeable ProsÂ
Anyone who invests in a rental property without first having the property professionally inspected is taking an enormous risk. While you may think that doing a personal walkthrough of a property is enough to spot any problems, many investors have learned that such thinking is pure folly. No matter how keen an eye you think you have, your observational skills likely pale in comparison to those of a professional property inspector. Certain issues can only be spotted and diagnosed by experienced pros, and failure to recognize this can lead to considerable regret down the road.Â
As a buyer, you have virtually nothing to lose by insisting on a pre-sale inspection. An inspection will not only enable you to make an informed buying decision, it also stands to strengthen your bargaining power. For example, if the results reveal the need for repairs and/or renovations, you have every right to ask that the cost of making them be taken off the asking price. As such, there’s little wonder as to why so many sellers discourage inspections. Should you encounter such a seller, you’d do well to make it clear that your interest in purchasing the property is contingent upon an inspection taking place.
Failing to Consider Operational and Maintenance CostsÂ
Depending on the property and the area in which it’s based, operational and maintenance costs may place a strain on your finances every month. Since a rental property is a long-term financial commitment, it’s imperative that you take such costs into account at the outset. After all, being able to purchase a rental property doesn’t automatically equate to having enough money to maintain it.Â
Operational and maintenance costs are particularly important to consider in the case of large multi-family properties. Apartment and condo complexes with dozens of units (or more) can cost thousands of dollars to maintain per month and require the presence of full-time maintenance personnel. As such, it is vitally important that you carefully weigh a property’s projected monthly income against its monthly operational and maintenance costs before proceeding to purchase. Conversely, in the case of small single-family properties, the aforementioned costs are likely to prove far more manageable – especially if you’re able to carry out a lot of the maintenance tasks on your own, thereby eliminating the need for outside help and the money it requires.  Â
There’s little wonder as to why so many people aspire to own rental properties. In many cases, owning desirable properties in desirable areas represents a convenient, low-effort way to earn passive income. However, it would be unwise to think that success is guaranteed with every rental property investment. Due to a variety of mistakes on the part of investors, rental property ownership can become a costly nightmare. Fortunately, avoiding the blunders discussed above can be a great way to minimize risks and set the stage for long-term gains.Â