Are Rental Property Investments Worthwhile?

Where’s the Profit

Numerous first-time rental property investors often make some bad management decisions, because nothing replaces experience in what you’re trying to accomplish venturing into a new field that you don’t have the ability to make informed choices.  One of the worst challenges is though that people have the misleading idea that as soon as they rent a property, they own it just all comes out automatically and there’s no work to it.  Well here’s some challenges that a lot of people fail to comprehend:

  • When you replace everything, is it necessary or can you do with what is within the standards of the community?
  • What are the comparable rents in the area or are you just assuming you can set any amount?
  • What is your budget for the total cost of any renovations, the mortgage payment which also includes insurance and property taxes, and can you handle those payments when you don’t have any tenants renting?
  • What’s your back-up plan if some type of natural disaster happens and your tenant needs to move out if it becomes uninhabitable?
  • Did you calculate your HOA fees into the cost of what your basic expenses are?
  • When you have a property on the market and believe that you’d rather show a loss than a profit at the end of the year because you think it’s a tax perk, what happens when you need to show positive financials for a refinance?
  • When are you projecting to make a profit and are you willing to keep it in an emergency reserves fund for those months you don’t have a tenant?
  • What’s your process to find a qualified tenant and keep them happy or your process to quickly remove a bad tenant?

It’s unbelievably easy to spend money but an unbelievably hard time to make it work for you, and a lot of business failures end up being caused by money mismanagement.  Everything needs to be thought through, the possible contingencies considered, and determine what’s going to be your best options in moving forward.  The key word is “budget” and actually maintaining one throughout the course of a business.

Dwayne J. Briscoe