(Akiit.com) They say that those who refuse to learn from the past are condemned to repeat it. Pertinent words for our times to be sure, especially as the political social and economic climate grows ever more uncertain. In a time of economic unsurety where the next economic crash could lurk around any corner the question of where is the most sensible place to put our money grows more pertinent than ever.
Do we save? Surely, that’s the best way in which to grow our money! It’s relatively risk free and our parents always taught us the value of savings. However, today’s interest rates make saving a difficult means through which to grow our money in any meaningful way, with many high street banks offering an APY of substantially less than 1% on our savings. How about stocks or other commodities like currency? There are certainly many who have made money in this way, but making money trading stocks and shares requires substantial knowledge and is still in many ways a spin on the roulette wheel. How about the new kid on the block crypto? While it seems as though this commodity is here to stay, it’s certainly not territory to wander into if you want to insulate yourself from risk.
No, friends, it seems that for the shrewd investor, the safest place to put your money is still real estate. But in order to make sustainable profits as a landlord one must also look to the mistakes of those who have come before. Let’s take a look at some commonly made mistakes and how it behoves you to avoid and overcome them…
Falling in love
It’s not uncommon for nascent real estate investors to assume that they will find success because they have consistently made profits in the selling or leasing of their own residential property. While there certainly can be correlation between these kinds of successes, identifying a successful residential property and a successful investment property require different perspectives. When you’re looking for a property in which you and your family will live, even if you have profit in mind laster down the line, you’re still looking for an emotional connection to the property. It will be your home, after all.
When it comes to an investment property, however, emotion can be the antithesis of profit. Emotion can lead a landlord to expect unreasonable rates, to channel more money into the property than necessary, to imprint their own personal sensibilities on the decor (and thus make it less appealing to tenants) and to cling to a property when it would be much better to cut their losses (more on that later).
Putting all of your attention on the surface level aspects of the property
If you choose a property that requires some renovation this can be a great way of securing yourself a bargain while increasing your chances of a robust return on your investment. But when it comes to making renovations, many a landlord has lavished all the attention on the superficial bells and whistles on the surface while neglecting the important stuff that lies beneath. Be sure to invest in quality infrastructure like plumbing and check out quality pipes online. While you may pay a tiny bit more for quality, you will be spared the expense of costly repairs a few years down the line.
Failing to properly vet prospective tenants
Needless to say your investment property cannot make money for you until it’s occupied. But this doesn’t mean that you should be in a hurry to fill it, and it certainly doesn’t mean that you shouldn’t properly vet prospective tenants with appropriate background and / or credit checks. All prospective tenants seem delightful when you interview them but show their true colors after a month or two.
If the couple who seemed perfectly nice at interview later trash or disrespect your property, are consistently late with their rent or just plain don’t pay and leave you with no choice but to pursue eviction you’ll wish you’d waited a few weeks to find the tenants who were right for the property.
Biting off more than you can chew
Being a landlord is more than just investing in a property and waiting for the money to roll in. It’s a business like any other, and as a landlord you have certain responsibilities to your tenants. Like any entrepreneurs, landlords can develop a habit of biting off more than they can chew. If you don’t have the time to dedicate to maintaining your property, seeking out appropriate tenants and attending to issues that they encounter with the property now and then it’s in your best interests to seek out a rental property agency. You may take a hit on your profits, but it will make the day-to-day of handling your investment much, much easier.
Focusing on the property and not the area
When you choose an investment property, you may well find yourself with an excellent piece of real estate. But if you set your rates based on your perceived value of the property without taking the surrounding area into account, you may well find yourself with a property that lies vacant for weeks or even months. Ensure that you have a sound knowledge of the area in which you will be investing before you commit to a property. This will inform your ability to set an appropriate level of rent which ensures growth while attracting the right tenants and ensuring that your property stays occupied.
Refusing to cut your losses on a money pit
Finally, remember what we discussed about forming an emotional attachment to a property? That can really come back to bite you if your property proves to be a money pit. If a property lies vacant no matter how many times you drop the rent to make it more appealing to prospective tenants, you could be missing out on better opportunities elsewhere. Sometimes it’s better to just cut your losses, admit defeat and take a loss so that you can bounce back stronger on your next investment.
The longer you keep hold of a money pit, the more you stand to lose.
Staff Writer; Peter Love