Investing in rental properties comes with a lot of risks.
Luckily, this type of investment is pretty rewarding as well, financially and otherwise.
The risks and rewards tend to balance each other out, and you have to be prepared for them before you spend the money on an investment property. There’s a lot of opportunity for long term growth and high rents, especially in a market like Volusia county. You can establish a solid financial footing and continue to leverage the properties you own to buy additional assets.
Let’s take a look at some of the risks and rewards that can be found when you invest in rental real estate. This should help you make good decisions as you begin investing.
Rewards: Recurring Rental Income and Increasing Home Values
Here are the major rewards: you’ll earn consistent rental income in the short term; and, you’ll earn long-term appreciation over the years that you hold onto your investment.
Thanks to inflation, higher sales prices, and more expensive mortgages, more people are choosing to rent right now. This leaves you with a large pool of qualified tenants and higher rental values.
Increasing home values and growing appreciation are also investment rewards. But, prepare for the risk that you won’t earn a lot of that appreciation right away. You’ll have to be willing to hold your investment property for the long term. Then, your investment property will be worth significantly more than it was when you bought it. And, you’ll have enjoyed years of tenants paying down your mortgage and covering your property expenses.
Risks: Expenses and Tenant
The rental market is strong right now, but there’s always a risk that things will shift. Rents could drop. Tenants could disappear. The type of property you own could completely fall out of favor with well-qualified renters, and no one will want to rent it.
That’s a risk. You have to prepare yourself for vacancy costs and turnover loss. These things are expensive, and often difficult to budget for. You’ll run into maintenance issues that are unexpected, and it’s possible your tenants will cause problems.
Good tenants who pay rent on time and take care of your property can be a huge reward.
The other side of that, of course, is a bad tenant who will damage your rental property, pay rent late or not at all, and cause problems and conflict for you, their neighbors, and your property.
The truth is, all tenants are risks – no matter how well you screen them. Someone can look great on paper and have good credit and income as well as a steady rental history. But, if they suddenly lose their job or find themselves in the middle of a nasty divorce – there’s no telling how they’ll deal with their obligations to you.
Balance Risks and Rewards with Professional Property Management
The property management partner you choose should deliver additional rewards and reduce your risk. Leveraging a qualified, experienced professional who can bring you knowledge, vendor relationships, and best practices is good for you and your investment success.
The rewards of investing are easier to access when you have the support of professional property managers. There’s less risk that you’ll make an expensive mistake, and there’s more opportunity to increase rents, avoid vacancy, and choose better tenants.
Let’s talk about how to have a better investment experience. Please contact us at Oceans Managing Group by calling (386) 255-8585, or visit www.oceanspropertymanagement.com.