subject: 4 Things You Need to Pay Attention to With Your Next Real Estate Investment [print this page] Many aspiring investors jump into the real estate investment game hoping to score big and become the next real estate mogul. Unfortunately, many investors see their hopes and dreams destroyed as the reality of the real estate investment business begins to take hold of them. In conducting due diligence on a potential real estate investment, you must pay attention to a few important items.
1.) Deferred Maintenance and Repair Costs
Your real estate investment will eventually need repairs, the real question becomes whether or not you have taken this fact into consideration. Many investors enter into a real estate investment without taking the time to account for maintenance problems that need to be repaired immediately in order for the property to operate at full efficienct. Also, many investors lack the foresight to account for repairs that will need to be made in the future and appropriately budget for them. This lack of due diligence will quickly turn your real estate investment sour and your "House on the Hill" will quickly become a "Money Pit".
2.) Bad Debt & Eviction Costs:
The reality of having a rental property is that not every renter will pay you on time or even pay you at all. Savvy investors must always take into consideration the costs that will be associated with not being able to collect rents and/or having to evict a tenant.
3.) Underestimating Taxes:
Many beginning investors underestimate their property taxes. Not only do investors need to be able to estimate their potential tax liability, but they also need to be aware of when their real estate taxes are scheduled to be reassessed and process that their city or municipality undergoes when it reassesses property. Investors, who fail to educate themselves on this issue, might find that they're in a profitable real estate investment that is scheduled to be reassessed in 6 months which would cause their real estate taxes to DOUBLE!! This can definitely cause problems to the profitability of your real estate investment.
4.) Vacancy Allowance:
Although it is hard to calculate vacancy rates, you must account for the fact that your property will not be occupied 100% of the time, and if this is the case, it generally means that your rents are too low. Upon estimating how long your property will potentially be vacant throughout the year, you will have a better estimate of your potential income and can plan accordingly for the vacant periods.
By paying attention to these 4 common mistakes made by investors, you will ensure that your real estate investment is stable, operating at peak performance, and will provide you with passive income for years to come. If you have any questions, we can carry the conversation over into the comments below so please let me know your thoughts and comment below.
4 Things You Need to Pay Attention to With Your Next Real Estate Investment
