There’s little wonder as to why so many investors actively seek out rental properties. Good properties in high-demand areas can generate consistent income for decades, making them attractive prospects to real estate veterans and novices alike.
However, if you occupy the latter category, it’s important to avoid falling victim to certain rookie mistakes. While it’s true that a good rental property can bolster your finances, there are a number of blunders you’ll need to avoid in order to ensure a worthwhile investment.
1. Not Recognizing the Importance of Location
Saying that location is an important factor in real estate purchases would be an understatement. Since many renters value location above all else, it’s only natural that investors would seek out properties in areas with ample demand for housing. While the general condition of a property and the number of amenities it offers are certainly important factors, no investor can afford to regard location as an afterthought.
That being the case, you should never invest in a rental property without thoroughly vetting its locations. For example, you’ll need to research local property values and rental rates, as this will give you a good idea of how much income the property will be able to generate.
Furthermore, having a solid grasp of local real estate values can help ensure that you don’t wind up overpaying for a property or charging too much – or too little – for rent. You should also take population, projected growth rates, and local economy into account before reaching a conclusive decision.
2. Forgoing Property Inspections
It’s easy to see why some first-time investors opt to forgo formal property inspections. In some instances, they’re so eager to move forward with a deal that they’re afraid of professional inspections needlessly prolonging the process.
Other times, buyers allow themselves to be talked out of inspections because they’re afraid of making waves with sellers and potentially jeopardizing deals. While not wanting to ruin a potentially profitable deal is certainly understandable, it’s never a good idea to forgo an inspection for a rental property, home, or any other type of real estate.
Even if you personally carry out a detailed walkthrough of a prospective investment property, it’s imperative that you enlist the services of professional property inspectors. No matter how thorough an inspection you do, there are problems that you, as a non-professional, are highly unlikely to spot.
Furthermore, if you opt to forgo crucial inspections, you’re liable to have a very hard time getting a property insured. So, regardless of how convincing an argument a seller puts forth, prepurchase inspections should be a prerequisite for any rental property you purchase.
Inspections ensure that you have all the facts before committing to make a sizable investment, and as a buyer, you have nothing to lose by insisting that the property be inspected by seasoned pros.
As such, it’s generally not a good idea to trust sellers who attempt to dissuade you from having properties inspected. Since the results of an inspection may result in you justifiably requesting a reduction in the asking price or walking away from the deal altogether, it’s easy to see why some sellers are adamantly opposed to them.
3. Refusing to Seek Advice from Experts
If this is your first time investing in a rental property – or making any type of real estate investment – you stand to benefit from the expertise of experienced pros. So, if anyone in your life has owned or managed rental property – or found success with real estate investments – it may be a good idea to seek their advice before proceeding to purchase your first rental. Additionally, if you’re on the hunt for effective real estate investment strategies, make sure to reach out to a highly-rated real estate investment company.
The right rental property can rake in a handsome sum on a monthly basis. In fact, if you put genuine effort into maintaining a property and addressing the needs of your tenants, a single rental can generate large amounts of passive income for many years to come.
Still, this isn’t to say that you should jump on every investment opportunity that comes your way. To help ensure that your first rental property turns out to be a profitable venture, take care to avoid the missteps discussed above.