Scare me! What are the risks I need to be aware of before REI?

[Anita Parsa]

I'm actively searching for my first multi-family property which I plan to have professionally managed.  

The market I'm shopping is solid (not hot, but solid) with good rent prices relative to purchase price with good cash flow opportunity.  

I tend to use extremely conservative numbers in my analysis so I'm prepared for higher than average vacancy, maintenance costs, etc.  If my selected property cash flows with those conservative numbers, the deal is probably okay.  

What I'm trying to wrap my head around is what the bigger risks are and how to protect against them.   

Lawsuits - good management company + umbrella liability

High Vacancy - conservative assumptions in original analysis + cash reserves

What other risks should I be cognizant of?  In the event of a serious economic downturn I could face inability to sell the property / foreclosure.  

Obviously I don't really want to be scared out of a investing in real estate...I just want to be sure I know what the risks are so I can mitigate them. 

[Matt Castle]

Disclosure: you said "scare me" so here goes. 

• Foundation issues
• Termites
• Floods
• Inadequate insurance
• Insurer fails to cover damages
• Water leaks - old pipes breaking leaks and tenant caused leaks
• Falling trees
• Drug dealers moving next door
• Meth cookers
  
• Squatters
• Copper thieves
• Looters stealing anything of value (furnace, appliances, etc)
• Multiple evictions back to back
• Slip & Fall scammers
• Tenants bring in people not on lease
• Property Manager is inadequate or worse disappears/incapacitated

I've been in REI for 19yrs so not much I haven't seen, experienced or personally bite me in the assets.