The potential income from real estate investments can be very enticing. It’s a simple concept. Buy a house, get a mortgage, find a tenant and let the rent pay into the equity for the house. That might sound simple enough, but often times it’s not. And the reason it gets so complicated is the same reason anything in life gets complicated, it’s the people.
The most challenging component to investing in real estate is not getting the loan, finding the house or doing renovations. It’s finding good tenants and managing the property. It can be a real headache for investors. That is why they quite often find qualified and experienced property managers to run their investment properties. Doing it yourself can become a nightmare.
That is the thing that most investors underestimate is the managing the tenants. If something breaks on the house itself, it’s often the landlords responsibility to fix it. But that usually isn’t the biggest headache.
The biggest headache is tenants who consistently don’t pay their rent on time and tenants who wreck the property. In many cases, it’s both.
I’ve had friends who have had nightmare tenants. Not only did they constantly not pay their rent, they also wrecked the house and it was difficult for him to get them evicted. The eviction process in many states is a complicated and difficult process. It takes paperwork and the right documentation to be able to legally evict a tenant.
That’s not the worst part sometimes. Sometimes the tenants leave all of their stuff behind when they leave. That means you are left with all their junk and you have to clean up their mess.
And sometimes, you don’t know what your tenants have been doing and that can be catastrophic. Sometimes they are drug addicts. That means you will find all kinds of surprises when you go in to clean things up.
With all the headaches involved in investment real estate, investors might be better off investing in stocks, bonds or growth funds as an alternative. You might still have some headaches, but it doesn’t compare to the nightmare stories that I’ve heard about investing in real estate.
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