As with any venture worth going after, there are challenges that you need to overcome in real estate investing. The difference is that when owning rental properties, investors need to act fast in the face of certain challenges. The reason is simple- your long-term or short-term rentals may turn into negative cash flow investments (you’ll be losing money) if you do not take measures quickly.
So, what are the common challenges that may arise when becoming a landlord? Well, you might face the first challenge when you’re starting your real estate investing business and buying rental property. That is if you can’t seem to avoid buying a negative cash flow investment property. The next challenge can come if you end up with the wrong tenants that are bringing you serious headaches. Another challenge you may experience when owning rental properties is having a high vacancy rate. Last but not least, being inexperienced in the field might also be tricky.
Are you ready to find out solutions to these 4 challenges of owning rental properties?
#1 Avoiding Negative Cash Flow Investments
Simply owning rental properties isn’t the most difficult thing to achieve. However, actually owning a rental property that produces positive cash flow- that’s a challenge. To overcome this, you need to learn how to start a rental property business with positive cash flow investments.
What you need to do is conduct the proper real estate analysis in order to ensure that the investment property of your choice will make you money. This means performing real estate market analysis, analyzing rental comps, and doing all the calculations associated with investment property analysis.
Doing this manually is a challenge within itself as it will take too much time and the possibility of making a mistake is high. So, what is the solution? Well, have you ever considered buying a rental property calculator? This real estate investing tool can find you the investment property of your dreams. If you want to succeed with owning rental properties, you should use Mashvisor’s rental property calculator. This tool will lead you to the best income properties in no time on the basis of market analysis and the computation of all the necessary real estate metrics. Click here to learn more about it.
#2 Ending Up with Bad Tenants
Being a landlord becomes a serious headache when you end up with awful tenants. Overcoming this challenge requires that you take some initial steps when finding tenants and when getting them set up in your rental property.
How to Find Tenants
Learning how to find tenants starts with attracting them to your rental property. You can do so by properly advertising your investment property as well as putting in the effort to organize property viewings. You can learn more by reading: 4 Real Estate Marketing Strategies to Find Tenants Quickly in 2019.
Now, in order to find tenants that will take care of your rental property, you should perform thorough tenant screening. This is done in order to learn about their background, financial situation as well as their future plans. The steps of the screening process sound clear, but sometimes actually doing this may be difficult as it may take too much time or a landlord may not be sure how exactly to extract such information. if this is the case, consider hiring professional rental property management.
The Next Steps to Avoid Dealing with Bad Tenants
When I say “bad tenants”, I mean tenants that do not pay the rent on time, damage the rental property, etc. So how can you make sure that you’ll never have to wonder what to do with a tenant not paying rent or how to get rid of an awful tenant?
The first step (after the tenant screening) is creating a contract that adheres to all the local landlord-tenant laws. In this contract, you should state the consequences a tenant will face if he/she doesn’t pay the rent on time. With a legal contract on your side, you will not need to worry about what to do when a tenant is not paying rent as it will be clear to all parties involved.
When it comes to tenants that damage property, yet again, state in the contract the potential consequences that may follow when something has been damaged (whether on accident or on purpose). If the tenant fails to comply with the written contract, you can evict them.
In the end, owning rental properties should bring you money and not problems, right? Well, a clearly written legal contract can help avoid most problems. Just be sure to follow through with any promised consequences so as to minimize the issues as they arise.
#3 Dealing with a Low Occupancy Rate
Another challenge that may appear when owning rental properties is a low occupancy rate. Well, we all know that having rentals with a high vacancy rate will sooner or later bring your business to bankruptcy.
So what’s the solution? First of all, check if the chosen rental strategy is suitable for the specific location. Second of all, check if your real estate investment property is in good shape as the first thing that potential tenants check is the state of the rental property. Further, make sure that you know how much to charge for rent as asking too much will potentially result in high vacancy rates and low rental income.
Hiring or consulting rental property management professionals that have experience in the rental business can help you identify the core reasons for your vacancy rate and remedy the issue. If you’d rather tackle the issue on your own, read The Best Tips to Boost Your Occupancy Rate for Better Tenant Retention.
#4 Having Little Experience with Owning Rental Properties
Well, this happens when becoming a landlord and investing in property for the very first time. However, you can overcome this by learning how to be successful in owning rental properties. For instance, it’s 100% possible to learn how to find tenants, how much to charge for rent, etc. all on your own. Do the research and figure out all of the answers to these questions before starting a short-term or long-term rental business.
Luckily, we can help you with that. When not knowing what to do when starting a real estate investing business or how to further proceed with your investments, come to Mashvisor. Besides having the right tools for selecting the most profitable investments, we have the right information to guide you in the process. We can teach you everything you need to know in the form of easily accessible real estate blogs. Check out our real estate investment blog now.
When planning on owning rental properties, be ready for the challenges but don’t let them intimidate you. Know that there are solutions that can help you overcome them to start making money in real estate.