When looking to add another stream of income, investing in property is something you should seriously consider. While you could buy a house and fix it up to sell at a greater value, you could also invest in something that you can rent out to others. After all, people do need somewhere to live, and not everybody has the means or the reasons to buy. Turning the property into a rental accommodation will give you the means to start making money relatively quickly. However, there are pitfalls you need to avoid if this is something you have been considering. These are just some of them.Buying in a high-crime area Not many people will want to live in an area that is deemed unsafe, so do your research before you buy. Your property may be standing empty for a long time and may be a target of crime itself if nobody is living inside it. While property will be cheaper to buy in less desirable areas, you are running the risk of bad tenants in certain areas. This isn’t to say people in less affluent areas are going to reduce your house to rubble, but it still pays to be cautious when choosing where to buy.Added repair costsYou need to have the money in your bank to pay for repairs. Assuming you have bought a house that isn’t structurally unsafe, you shouldn’t have to do a lot of work, but there will be natural tear and wear, occasional weather damage, and the odd mishap caused by the tenant. Problem tenantsPeople are generally good, but tenants can cause all kinds of problems. From calling you at ridiculous times in the morning because they have caused flood damage from an overflowing bath, to not paying rent on time for any number of reasons. You can reduce some of these issues by finding property management companies to deal with the tenant on your behalf, or taking the time to carry out some background checks before you sign a contract with anybody who could potentially cause you a headache.Dealing with evictions
Hopefully, you will have many great tenants for years to come, but if you do have a tenant that causes major problems, you will have to evict them. This isn’t as simple as it sounds, as tenants have as many legal rights as you do. A watertight contract should do the job, but even though they have breached your terms, you still need to remove them from the property. Not easy, if they have barricaded themselves in! Loss of financesThere will be downtimes when your property does sit empty. Tenants come, and tenants go, so you will need money in your bank to account for the lack of rental income. Then there are the possible repair and cleaning bills that come from getting the property ready for the next potential tenant. You need to go with the flow when it comes to renting property, and this means having the cash reserves to deal with the expected and unexpected costs that go along with the process.Bottom lineYou can make a lot of money from being a landlord, but it’s not all fun and games. You can still lose money on your investment, so you need some level of financial independence before you enter the market. However, with a little bit of research, and some savvy money management, you may reach the financial goals you are aiming for.
