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3 Common Problems Investors Face and How to Deal with Them
Buy-and-hold investments offer an incredible path to financial security and freedom, but they aren’t without their problems. Like nearly everything in life, there will be times when you have certain….shall we say, issues….that come up. But fear not, most of these have definitive solutions, or even ways you can prevent them from happening altogether.
Here are 3 of the most common problems investors face, along with how you can deal with them if and when they happen to you.
- Difficulty Finding Great Deals
Who doesn’t want a great deal on a real estate investment? Literally no one. But what happens when you just can’t seem to find those properties that offer you the most bang for your buck? A lot of investors were spoiled after the recession, when the market was packed with low-cost homes that were virtually guaranteed to turn a profit for them. Now that the economy has stabilized and home prices have risen, it’s become a bit more challenging to locate those amazing deals.
My advice for dealing with this problem? Change your strategy. Quit focusing so much on the purchase price, and turn your attention to making more money on the investment post-purchase. What can you do to increase its value? How can you justify raising the rent so you can net more positive cashflow? The key is in identifying different ways you can boost profits after you’ve made the initial deal.
And if the deal itself is still really important to you (and let’s be honest, it still should be), consider changing your search methods and/or your expectations. Check out other markets you hadn’t considered, or even other areas within your current market. Use multiple search platforms, expand your criteria to include things you maybe hadn’t before (i.e. multi-family), or think about joining forces with another investor so you can score a higher-priced property. There are good deals out there, you may just need to work a little harder - or work differently - to find them.
- Awful Tenants
I hear all the time from investors who say they are stuck with terrible tenants. Here’s the thing, though: they’re not stuck. There are ways to get out of a bad tenant-landlord relationship, so long as you’re doing it the right way. If you’re already saddled with awful tenants who are causing you more stress than they’re worth, you’ve got to get them out ASAP. Be fair but firm, and make sure you’re following all housing laws regarding eviction. Don’t enter the property without conferring with them, don’t touch their stuff, and don’t shut off utilities. You may feel justified in these actions, but trust me, it could come back to haunt you in the form of a nasty lawsuit. Be professional, be civil, and do it by the book.
And, for the love of whatever deity you believe in, don’t let it happen again. Thorough tenant screening is the best way to prevent awful tenants from taking over your property - and your life - so take this part very seriously. You need to vet each and every potential renter to be sure that they are able to pay, will respect your property, and won’t cause you a massive headache during their lease.
- Sub-par Property Management
A lot of investors make the decision to use the services of a property manager to maintain their property. It’s a good choice, as property management is an extremely time-consuming aspect of real estate investment, and many investors simply don’t have the time to worry about all the little details that come with ownership.
If you’re partnered with a management group that isn’t doing their job satisfactorily, you’re going to discover very quickly how much of your time and money this will eat up. Things like disorganization, not relating to tenants, and not reporting to the property owner how they should are some of the common issues we hear about.
The best way to handle a sub-par property management group is start by communicating your concerns. There’s a good chance they’ll work to improve on the areas you take issue with. If they don’t, it may be time to break the agreement. There may be penalties for doing this, but if your concerns are legitimate, these may be waived.
It’s critical that you work to find a property management group this is dependable, trustworthy, and responsive to both you and your tenants. When looking for a manager, ask for referrals from other investors, and do a bit of background research to ensure that the company is reputable and will perform how you want them to.
You may have noticed a common theme among these problems, and that’s the importance of due diligence on your end as the investor. Many of the issues that buy-and-hold investors face can be prevented by simply taking the time to research different areas before you act. If a problem does arise, don’t panic. There is usually an obvious solution, and with time, effort, and perseverance, you can work through issues and ultimately reach your investment goals.
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