This time of year, we revel in all things spooky – goblins and ghosts, skeletons and grim reapers, witches and creepy-crawlies. Most of us know there’s a difference between an innocent scare and true terror. And while we may not be talking about buckets of blood in the latest Halloween thriller, a few things should strike fear into the heart of any SFR investor.
Yes, these scenarios are terrifying. But here’s the good news: you don’t have to live in fear. With proper due diligence and experience, you can largely mitigate these scares…you might even avoid them altogether.
7 Scary Scenarios Investors May Face
Scare #1 – Unanticipated Property Issues
The Scenario: You just bought what seems like a fantastic investment property. But now that the deal is done, you find a host of issues the inspector didn’t mention. You realize you’ve got big – and expensive – problems on your hands!
Inspections aren’t going to catch everything. When investors focus on trying to score a deal, the attractive price tag often hides issues that the seller hopes you’ll ignore. The best thing real estate investors can do is invest in quality properties rather than chasing the lowest prices. Any property can have issues, but you’re less likely to find serious defects when you aim for quality.
Additionally, a turnkey partner helps investors find and buy properties that have already been purchased, renovated, and fully assessed.
Further Reading: What Makes Low-Cost Properties a Bad Bargain?
Scare #2 – Privacy & Data Theft
The Scenario: You’ve embraced the digital age. Your banking, mortgage, and financial transactions are secured online…or so you thought. Some greedy hackers have compromised your data!
In the digital age, it’s almost impossible to go uncompromised at one point or another. But what investors – and anyone, really – should do is practice wise digital safety and security. Utilize two-factor authentication when available. Avoid repeating passwords, especially with accounts containing sensitive information. Change those passwords periodically, too. Know typical phishing schemes and invest in solid antivirus/antimalware protection.
Scare #3 – Property Damage
The Scenario: You had every reason to believe your property was in good shape. No significant weather risks, and attentive residents. It was all smooth sailing…until that deep freeze made a pipe burst!
We can’t always anticipate property damages. The best we can do is mitigate the risk. That means investing in areas with lower environmental/weather-related dangers, securing adequate insurance coverage, and utilizing attentive, timely maintenance (such as winterizing).
Scare #4 – A Legal Mess
The Scenario: You’ve been minding your own business. Everything seems to be going fine…until former residents have you served. What went wrong?
First things first: have a lawyer you can trust. Second, keep your investments tied up in an LLC or other business entity. This limits your personal liability in the event you’re sued. Lastly, work with people who understand and respect the law. Know it yourself!
Scare #5 – Market Volatility
The Scenario: Everyone around you was hyping up the next greatest real estate market. But just a year or two later, demand has dried up, and your property is worth less than when you bought it.
Market volatility Is scary because we can’t always accurately predict the real estate market. While it tends to follow some basic rules, some things can’t be anticipated. You avoid a situation where you invest in the wrong market by valuing the right things. You don’t need the explosive-growth, high-octane cities. Look for balanced, modest markets defined by reliable increases and steady demand.
Scare #6 – Fraud
The Scenario: You just bought a property. Or so you think. One of the most common forms of real estate fraud is title fraud, and you just found out the “seller” didn’t even own the property. You have no legitimate title, but you’re out the cash.
Fraud has grown alarmingly common. Inexperienced DIY investors are most susceptible to these scams, but even experienced investors can fall prey to them. This is where we stress due diligence again. Ask the questions. Do the digging. Look the gift horse in the mouth. Verify information. This is your money and your financial future. Don’t be afraid to play hardball.
Scare #7 – High Turnover
The Scenario: You have a seemingly great rental property..but you can’t seem to get anyone to renew their lease. In fact, some people have broken the lease early, too, and it’s really starting to affect your cash flow!
Superior property management significantly reduces turnover issues. When your property is well-managed by people who care about the residents (including their satisfaction and well-being), you’re much more likely to see renewals. While it happens sometimes, you can keep it from being a frequent issue.
Your fears are unfounded when working with an experienced and diligent turnkey partner. Your REI Nation advisor is happy to get you on the right path to lasting passive wealth!
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