Buying real estate properties can be a great way to diversify your investment portfolio and make some extra income on the side. If you’re looking into investing in real estate, you should be familiar with the challenges and risks that it might present you with. Here are a few of the risks that come along with investing in real estate.
First of all, when you aren’t there to constantly take care of and oversee your rental property, you’ll inevitably run into some property damage. Some damage always occurs to your property due to weather and the natural wear and tear of daily life. Damage can also occur when your tenants don’t take the best care of your property or don’t clean sufficiently. Property damage can be costly to repair and take care of. This can be a big financial risk for you as the property owner.
Missing Mortgage Payments
Next up, having a real estate property can also be risky because you could miss mortgage payments if you have negative cash flows. This could be financially detrimental to you since you likely won’t be able to keep the property (or multiple properties) afloat by yourself. Most real estate owners use their property rent to cover the mortgage expenses, so it is important to have consistent tenants. Keeping your properties full can help you continue to pay your mortgage.
Another risk that can come along with purchasing a real estate property is dealing with a bad location. If your home isn’t in a convenient location that tenants would like to live in, you’ll have a hard time keeping tenants consistently renting your property. For example, if you choose to buy a property that isn’t close to schools, grocery stores, or work locations, it might not have a very big draw for tenants to live there. So, when you’re choosing a property to invest in, make sure that you consider the convenience of the location.
So, if you’re looking into investing in real estate properties in the near future, remember these risks that might be presented to you. You might have some property damage, missing mortgage payments, or bad locations that could threaten the financial security of your investment. However, making sure that you have proper management and maintenance of your property can help you to produce a great ROI.
Check out this article on how to get through your first time selling a home!