EMBRACE THE ADVENTURE OF REAL ESTATE INVESTING!

EMBRACE THE ADVENTURE OF REAL ESTATE INVESTING!

Dominica Applegate is here to discuss the hurdles of real estate investing. She contributes to Inzopa.com, a private network of home buyers, owners, mortgage lenders, and real estate agents.

Over the past five years, with a rise in foreclosures, real estate investing has surged. Investors are capitalizing on the down market to buy rental properties at very low prices. Real estate investing can provide substantial residual income, but it’s essential to be prepared for the associated challenges before rushing to secure a loan.

Preparing Foreclosures for Rent

Not all foreclosures are in great condition; some can be quite damaged. If you’re investing in real estate, you must be ready to spend both money and time on making these properties tenant-ready. This might mean hiring a painter, carpenter, plumber, landscaper, or electrician to make the home livable. It saves a lot if you can handle some of this work yourself. Financial readiness to invest in refurbishing a foreclosure is crucial before starting your investment journey.

Finding Suitable Tenants

Most real estate investors would say that dealing with tenants is one of their biggest headaches. Finding reliable tenants who pay on time and take care of the property isn’t always easy, but there are ways to improve your chances. If your budget allows, hiring a property manager is a wise move. They typically charge about 10% of the monthly rental rate, but this fee covers a lot of responsibilities and can save you many headaches. Property managers handle advertising the rental, showing it to potential tenants, processing rental applications, conducting credit and background checks, and making the final decision on who rents the home. They also manage rent collection, send late notices, and handle evictions if necessary. Without one, be ready to take on all these tasks yourself.

Dealing with Property Damage

Even with a top-notch property manager, sometimes seemingly respectable tenants won’t take care of your rental property. Many investors have faced homes left trashed after tenants move out, with piles of garbage, stained carpets, damaged walls, water damage, and even pest infestations. Are you prepared to deal with these issues? Always require a full month’s security deposit and a pet deposit, as dogs and cats can cause significant damage if not properly managed by their owners.

Handling Rent Payment Issues

You might face situations where tenants can’t pay rent, such as due to a personal crisis. Even if you pursue eviction, the tenant could stay for weeks until the court hearing, potentially costing you one to two months’ rent. Ensure you’re financially prepared to cover the mortgage in case a tenant vacates suddenly or stays without paying until the eviction process concludes.

Final Thoughts

Owning real estate has its perks, like cash flow and having tenants help pay down the mortgage. However, it’s important to be ready for the challenges that come with investing. Over time, you’ll get more accustomed to these hurdles, and managing them will become less of a struggle. Real estate investing is a promising way to boost your yearly income and set yourself up for a financially secure future.