09 Dec Reducing Investment Risks
While it’s tempting for first time investors to downplay the very real risks that come along with rental property ownership, there are several ways that a good investment on paper can quickly turn into an unprofitable venture in reality. Make-or-break factors include:
Turnover and vacancy rates: The biggest factor in generating an acceptable profit margin on a rental house is simply keeping it rented. An average annual vacancy rate of more than 10% (or about 1 month per year) can often wipe out profits.
Evictions: Without proven tenant-screening methods, first-time landlords often end up renting to unqualified tenants, which frequently ends up necessitating eviction proceedings. According to a recent survey, the average evictions results in the equivalent of four months’ lost rent.
Significant maintenance costs: Generally speaking, tenants are not as invested in the upkeep of their homes as they would be if they owned the property. This can result in small maintenance issues escalating into situations that require expensive repairs.
Knowing how to prevent these scenarios is where professional property managers come in