We all understand that every business involves some kind of risk and Rental business is no different. You understand that risk in involved but you don’t know what those risks are. If you are new to real estate investing its okay to not know but sometimes even the experienced one falls. In simple words all the risks with rental properties involve money and below are the most likely ways to lose your money in rental real estate business.
It is a tricky way to lose the money because at first glance it is not obvious as a factor but in truth it one of the costliest issues you will face with the rental Property.
If your property is lying vacant without any tenants then you are losing money in terms of:
• Monthly rental income
• Repairs (Because property still needs it)
• Agent fees (If you have appointed a property manager)
Many new comers underestimate the power of loss due to vacancy because they don’t realize that they are investing without any returns from the property.
Every property needs maintenance and repairs and there can be several reasons for this such as:
• Tenant induced some damage
• Tenant moved out and you have to fill in the vacancy
Maintenance task can vary from small normal repairs to large replacements such as water heaters and roofs. Minor repairs can be done within 100 dollars but major repairs could cost you thousands of dollars.
Decrease in rent rates
Rent rate is actually what the Rental Property is bringing in, in terms of numbers and these numbers than determine the profit. When the economic condition of the market changes and rent decreases then your income level drops down and so is your profit. Pretty simple!
So does the rental business scare you now? Well, it shouldn’t. These all are the risk factors which will come along in some other form even if you are to opt for some other business. But if you understand them then you can take effective steps to counter them and can still keep making the profit.
Keep track of all the payments, invoices and analyze them to prepare the reports to get the better picture of your business. With SimplifyEm property management software managing multiple properties is very easy. Not only you end up saving the time but you also save money in the whole process which means more profit.