Strategy

Dumb Mistakes Rental Property Investors Make

Often times we make things harder on ourselves than they should be.  This is no different in rental property investing when you do the mistakes listed below.

Dumb Mistakes Rental Property Investors Make

  • Forgetting that Rental Property Investing is a Business

It may be called investing, but make no mistake this is a business.  Rental properties offer many more ways to make money compared to just holding stocks.  However, they also require some work and care as opposed to just buying and holding.

For your rental property to be profitable you need to make sure that your rent is being collected and the property is maintained.

The easiest way to do this is hire property management.  They handle the business side of it for you and the main thing you need to do is make sure they are doing their job.

This doesn’t mean you can sit back on autopilot, but it does mean your are more of a supervisor than a day to day manager.  The property management needs to held accountable for their work.  Shaking a hand and expecting rent checks to roll in with no communication there after is fantasy land.

More importantly, if you are self managing then you need to definitely remember that this is a business.  By interacting with your tenants you will form some type of relationship with them, but you must remember that this is`your business.

There will be tough decisions to make and some of them will make your feel heartless.  To be honest, I still struggle with this as I am too nice for my own good at times.

Bottom line though, if someone is not paying their rent for many months it doesn’t matter how bad their story is, they are not your family and it is not your problem.  There is a reason an eviction process exists and it is for people not paying their rent, among other things.

Sounds harsh even saying it, but if you are not willing to proceed within your full legal rights as a landlord than you are doing your business a disservice.    This isn’t to say you shouldn’t work with people at all, especially someone that has been a model tenant in the past, but be careful giving a leash as it can blow up in your face real fast.

  • Banking on Appreciation

This drives me more crazy than anything when it comes to rental property investing.  If you have read my posts you know I preach the “buy right” method.  Buying right means to only acquire rental properties that produce an acceptable cash on cash return, which we calculate using a property calculator.

If we have monthly income coming in at a solid rate of return than the burden of what the market will do is off our minds.  If you are relying on appreciation as part of the return you expect to get on a property you mind as well buy stocks and gamble in the market.

Appreciation is not an investment play, it is a speculation play.

I traded the stock market full-time for more than five years – if I want to speculate I will go there.

Rental properties are my favorite investment because they create steady and predictable wealth over time.

In Conclusion…

You must be willing to take the actions that will unfortunately feel uncomfortable and sadly come up in the business of real estate from time to time in order to have long-term success.

Additionally, let the principal  paydown and monthly cash flow of rental properties build your wealth.  Appreciation is like a performance bonus, you may or may not get it depending on how the market did.

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