Real estate can be a tricky business, there’s no doubt about it. As rewarding as it can be, there are many uncertain factors that can create a big financial risk for investors. Here are a few of the most common issues that make potential investors hesitate.
High Entry Costs
When it comes to real estate, the beginning is often the hardest part. The investor lacks experience and often a financial safety net as well. Such a safety net tends to develop after a couple of successful investments. After all, more property and more money promise a happier ending if something goes wrong. However, in most cases, an investor who is entering into the field of real estate for the first time has no such backup. If the property in question does not yield the desired reward, it could seriously endanger their personal finances if they aren’t prepared. Money lost on small rookie mistakes—property maintenance done incorrectly, and so on—also poses a risk.
Getting a bad renter can be a miserable experience. Financially, they can cause damage to the property and delay the payment of their rent. But they can also be a real source of consternation for you personally! When there is an altercation with neighbors, if the tenant is making too much noise, if they are doing anything illegal, if they damage the home—every problem the tenant creates will be thrown first and foremost to you to deal with. This is why the matter of finding a good tenant should be of tantamount importance. Screening your applicants can help single out higher quality tenants. You should interview them face-to-face and review their housing history before choosing.
Lack of Quick Payoff
Rarely do people get rich quick in the business of real estate investing. While it is true that, long term, real estate can provide a serious amount of income, it usually takes a year or more of financial uncertainty. Even a well-flipped property and a good tenant can be undone with one natural disaster or one hidden infestation. Sudden windfalls of real estate income can be undone quickly by emergencies or other crises related to the upkeep of the house. The time, effort, patience, and mental fortitude needed for investing can often be discouraging.
Of course, none of this means you shouldn’t try! Real estate is tricky, yes, but it also pays well to those who take precautions. If you understand what you’re getting into, and you are determined to put in the effort required, there is no reason you cannot prosper by investing in real estate.
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