Most investors will tell you that one of the most lucrative real estate investments is investing in rental properties. By charging good monthly rental charges, you can manage to pay for your mortgage payments and meet any costs incurred in the maintenance of the property. Rental properties are also very profitable.
However, if you end up with bad tenants then this will be a definite risk. Tenants may fail to meet the rental costs and therefore fall behind in making payments. This may force you to use your own funds to pay your mortgage payments.
Other tenants may damage the property therefore forcing you to spend much more money in repairs. Some may completely ruin your property forcing you to resale it at a much lower price.
Another risk is failing to make any profits. Your rental charge may only be enough to pay your mortgage. Sometimes it may not even cover these costs. This happens especially when landlords are forced to charge less rents than they expected. For instance, if you have rental property in an area that gets termed as being insecure, your rent may have to go down.
There is also the risk of not getting tenants. You may ends up with vacancies which pose probabilities for losses since you will still have to meet the costs of the property.
The risks involved in investing in residential property
You may decide to invest in commercial or residential real estate. Residential property is still a form investing even if it only consists of the house that you live in. This is a very valuable asset.
One of the most popular risks involved in this kind of investment is buying property without having done adequate research about it. You may end up buying property in the wrong neighborhood that poses a security risk. There are actually homeowners who have ended up renting alternative houses because of this reason.
You may also get the wrong location in terms of natural calamities. For instance, a homeowner may buy a house in an area notorious for tornados or hurricanes. In the eventuality of any of these calamities, he may end up losing the home or incurring losses due to the cost of repairing the damaged property.
There is also the risk of buying the wrong property in terms of the condition. You may get a very good price for a house without realizing that it’s actually falling apart. This coupled be caused by ants, molding or a number of other things. Such an investment may bring about losses to the homeowners.