There are many advantages to investing in real estate, and even more to investing in turnkey rental properties. For example, the overheads are relatively small. Additionally, a little bit of smart house-hopping yourself with an initial owner-occupier loan means that a year of living in your rental property can reduce these further. Before you know it, you’re well on the way to building a portfolio without even living in a home you own.
It’s easy to see why investors get excited about all the positives of real estate investing. Unfortunately, too often these investors are so enthusiastic to get started they make some costly mistakes. Here are a few of the most common mistakes people make when they’re just getting started investing in turnkey rental properties.
5 Common Mistakes People Make When Investing in Turnkey Rental Properties
1. Going it alone.
If you’re a capable individual with perhaps many years of running a business behind you, the temptation to source your own properties and cut out the middle man might be difficult to resist. After all, you may be used to spotting snags and closing deals to your advantage, so how hard can real estate be? Harder than you think.
Even if your purchase is pristine and otherwise trouble-free, and your sitting tenants (if you have them) are model citizens, the sheer quantity of paperwork can take up enough of your time that the returns dwindle down to close to nothing. Even basic administrative tasks can take up hours of your time a week.
2. Not having a buffer fund.
Even if you’re happy to take on all that paperwork yourself, what happens if something goes wrong? If the roof needs repairing, the boiler needs replacing, or—worst case scenario—those perfect tenants aren’t so perfect after all and you need funds to remove them, you can find yourself in quite a financial mess
3. Giving in to greed.
You could argue that the whole point of investing is to make money, but don’t be fooled into chasing the highest yield, as you are likely to lose money should the property market dip. Real estate that offers consistency is far more likely to make you a stable passive income in the long run.
4. Going with the wrong agency.
The issues mentioned above have probably convinced you that finding a real estate company that specializes in turnkey property investment is the best way of avoiding problems. However, your agency might not be as experienced as they might claim, or they may not even hold a real estate license. Additionally, they may have no experience in dealing with problem tenants, and leave you the difficulty of arranging eviction. Even if they are otherwise competent, an agency that doesn’t provide a comprehensive service including everything from cutting the grass to collecting the rent can seriously impact your bottom line in terms of eating into your precious time.
5. Buying locally when you can buy cheaper in a different location.
You may prefer to have your properties where you can visit them regularly, in which case, this is an expense that you will already be prepared to accommodate. However, there are bargains to be had that you couldn’t find closer to home (especially if you live in an expensive city!), so don’t rule out asking a good agent to source these for you.