Reasons First-Time Rental Property Investors Hit Snags
Feeling buyer’s remorse in response to a rental property investment is truly an unenviable position to be in. Considering how much capital goes into the average real estate investment, it’s only natural that first-time investors would want this purchase to generate maximum returns. Unfortunately, there are a variety of reasons for which first-time rental property investors hit snags and fail to profit from their investments. However, by educating yourself on these reasons in advance of purchasing your first rental, you can effectively diminish your odds of disappointment.
They Don’t Understand the Market
If this is your first time investing in a rental property, it stands to reason that you don’t possess an advanced understanding of the real estate market. Needless to say, you’re better off going into your first investment with a solid grasp of how the market works than simply winging it and hoping for the best. So, if you haven’t already done so, take care to enlist the assistance of seasoned experts.
For example, if you have family members, friends or acquaintances who are well-versed in real estate, reach out to them and request their guidance. If some in your usual circle has ever owned or managed a rental property, any insights they have to offer can prove tremendously helpful.
If you don’t know anyone with rental property experience, you can still seek the knowledge you need from a highly-rated real estate investment company. Seasoned experts will be able to provide you with invaluable advice on selecting properties, identifying profitable locations, real estate investing for accredited investors and many other important subjects.
They Don’t Do Research
Thorough location research is essential to making an informed decision. So, before committing to purchase a rental property, take some time to look into its respective locale. Researching local property values and rental rates can be a particularly important part of this research, as it will provide you with a good understanding of how much you can expect to pay for a local rental and how much income one will be able to generate each month.
Getting a feel for local property values can also help prevent you from overpaying for your first rental. For instance, if you notice that similar properties in the area are selling for considerably less than the one that’s captured your interest, promptly request that the seller explain the rationale behind their asking price.
They Don’t Have Properties Professionally Inspected
Given how much capital is required to pay for the typical rental, it’s only natural that you’d want to know exactly what your money is going towards. As such, it’s important to personally inspect every property you have an interest in purchasing. However, it should also be understood that personal walkthroughs are not a suitable substitute for professional inspections.
Certified inspectors are trained to seek out and identify a host of property issues that most of us would never think to look for, much less be able to name. It’s hardly unusual for a property that appears to be perfectly maintained to be plagued by cumbersome problems, so no matter how confident you are in your personal findings, insist on having any property you have an interest in purchasing inspected by a seasoned professional. If you forgo an inspection and discover large-scale problems after the sale has gone through, you’ll have only yourself to blame.
Not Budgeting for Repairs and Renovations
One of the most important reasons to insist on pre-purchase inspections is getting a clear accounting of any outstanding issues with a property. Once you’ve received the inspector’s findings, you’ll be aware of any repairs or renovations that need to be made and be able to obtain estimates from relevant contractors. This will give you a good idea of how much getting a property into livable condition will cost, thus enabling you to budget for repairs/renovations accordingly or walk away from a property that’s too much trouble.
A rental property is not a purchase you want to wind up regretting. Given the hefty sum you’re likely to spend on a rental, wanting to see it generate healthy returns is perfectly natural. Furthermore, depending on how capital goes into your first rental, hitting a snag stands to massively deplete your finances. Fortunately, by taking the time to study up on the most common reasons first-time investors face difficulties, you can dramatically reduce your chances of encountering similar problems.
