Monday, April 7, 2014
Investing in rental real estate may seem like a dream opportunity. However, contrary to popular belief, it’s not just about renting out a property and sitting back while the cash rolls in. There are some serious risks involved and routine responsibilities that come with the job.
The most obvious advantage of rental real estate is the monthly income you can earn without actually having to clock in and work for it. If you specifically buy property for renting out, you may also pay off your mortgage installments with the monthly rent you earn. Rental properties are income-generating assets that are worthwhile, long-term investments.
Investing in real estate means you're buying a tangible asset, a property you can use for your own purpose should you decide to forego the role of landlord. Real estate also appreciates over time. While it’s not guaranteed that the rate of appreciation will be profitable, properties in great locations have better chances of increasing in value. Those in less desirable areas may still appreciate from general inflation.
As a landlord, you have certain responsibilities to your tenants. Repair and maintenance of the property should be regularly made to keep your rental property in good condition and your tenants satisfied. These responsibilities take some time, effort and expense on the part of the landlord. Aside from routine maintenance, there may also be some unforeseen expenses such as property damages and bad tenants. Properties may deteriorate as a result of wear and tear or your tenant’s carelessness. Landlord's, therefore, need to take responsibility for these eventualities.
While rental real estate looks promising, don’t discount the fact that there may be vacant periods. During vacancy, you won’t be generating any income from the property. Additionally, regular expenses such as property taxes and regular maintenance still need to be shouldered by the landlord.