Property investment is never to be taken lightly and requires a huge amount of planning beforehand but if you are prepared to do your homework first, you will stand the best possible chance of being successful. Any business venture, like a house, needs to be built on firm foundations.
There is a vast amount of information nowadays on T.V networks, in books and The Internet regarding real estate investment. Make use of this wealth of knowledge and it will enable you to make a wise and balanced decision when you come to make your first investment property purchase. The common sense, uncomplicated strategies are usually the ones that work. If you find a strategy that works then keep on repeating it so that you will encounter fewer Cons than Pros.
There are online forums where you can share ideas with other investors and learn from the mistakes of others before committing yourself to a particular project or strategy.
Being your own boss will be one of the main plus points of being an investor in rental property. You will not be tied to a particular routine and will have more choices over your day to day life than regular nine to five employees.
Once things are set up and the initial hassle is out of the way you will find you have more spare time to devote to other interests. But you must always be prepared for things to go wrong. Here are the main disadvantages of being an investor in rental property:
Property investment is not a get- rich- quick scenario. Time is perhaps the most important factor concerning property investment. You have to get the maths right. Forget e=mc2.The key equation when it comes to property investment is: Bricks + Time = Money.
A rental property will rarely transform itself into a goldmine overnight allowing you to ‘Flip’ it and turn the bricks back into cash. Be prepared to tie your money up for years so don’t over commit yourself or leave yourself with not enough to put bread on the table in the short term!
You will have to be prepared to put in a tremendous amount in time; energy and money before you are anywhere near the stage of seeing any return on all your hard work. ‘Asset rich, cash poor’ is a saying that could not be more appropriate.
There is no end to paperwork mainly caused by unnecessary rules and regulations. Legislation regarding rental property is constantly changing both in the UK and The USA and can be a minefield for novice investors. Whereas landlords of long standing will be used to all the pointless paperwork, as a newcomer you will need to ensure you have all the relevant sources of information to hand before letting your first property.
You will make costly mistakes and errors of judgement but you must learn not to make them again. Treat all this as a learning process and you can change some of the Cons into Pros.
When letting property, you are required to keep regular accounts of expenditure. Apart from balancing your books for your own records you will have to keep up to date accounts for tax purposes. Be prepared to spend an enormous amount of time in your office,
Even the fairest of landlords will have trouble with disruptive and downright disgraceful tenants at some point. Never expect people to treat you good in return just because you have been fair to them. Hiring a letting agent may free you from this burden up to a point because you will not have to negotiate with the tenant yourself but ultimately the responsibility of sorting things out will still be yours.
Be wary of the fact that everybody will try to rip you off because they assume you are wealthy! Even if you only have one rental property they will think you must be loaded purely because you have been able to purchase another house in addition to the one you are living in yourself. The reasoning behind this is distorted as you have most likely borrowed heavily to secure your investment property and anything borrowed has to be paid pack – plus interest!
You will have to be prepared to get your hands dirty, clearing rubbish on the occasions where a tenant has done a runner and left the rental property in a mess. You will just get on with it so that you can clear and redecorate and hopefully find a better tenant next time round. However much you don’t like the idea of sifting through other people’s dirt and debris, you know that if you don’t do it your bank balance will be sure to suffer.
Taking all the pros and cons into consideration there is usually an imbalance of cons for several years before your rental business will be well enough established to bring any monetary gain. You must be prepared to accept this and think of everything concerned with your business from a long-term perspective. Hopefully the pros will outweigh the cons when this starts to happen and you will be a hundred percent pleased with your decision to become a property investor.