What You Need to Know About the Unglamorous Side of Real Estate
We all have a friend who is quick to tell us about their success in real estate. They want to brag about how investing in real estate or some sort of a rental property is the best idea on the planet. They’re convinced that you need to get into real estate. They want you to buy a rental property right away.
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While I personally love real estate, there are things that nobody tells you about — which is exactly why I’m going to do so right now.
What Nobody Tells You About Real Estate
Example 1: “I’ve been up all night. Man, I need another coffee.”
My buddy called me asking for help. His small apartment building had flooded. A few of the units were ruined. Water is very deadly when it comes to damage. He had to entirely gut a few units. He was in for thousands of dollars of damage and many sleepless nights.
There was nothing pretty about what had just happened.
Example 2: “I have to go buy heaters for the tenants.”
One day in the winter, the central heating system went down for this same friend. The whole building was about to freeze to death.
What are you going to do? You can’t let your tenants freeze to death on a cold Canadian night. You have to keep them warm. So he went and purchased heaters for the unit because he couldn’t reach his maintenance guy (it’s not easy to reach anyone in the middle of the night).
What is the not-so-glamorous side of investing in rental properties?
The incidents that wake you up at 4am. The nights that you can’t sleep. The headaches that you have to endure because you’re responsible for everything. The fact that, unless you hire a rental property management firm, you’re on the hook for everything.
The above are just two experiences I heard from knowing a friend who happens to own a small building. I could only imagine some other horror stories that landlords have had to deal with.
But wait, we’re not done yet!
What else does the “dark side of real estate” entail?
Tenants aren’t always perfect.
When you screen a tenant, it’s like screening someone for a job. The candidate is going to do everything possible to get their foot in the door. Their references are all going to praise them. You won’t hear anything but highly positive things. You won’t see their true colors until many months into the relationship.
The reality is that tenants won’t always be perfect. The problem with this is that you might be in for a rude awakening when you find out that your client is going to call you for every little issue. There are tenants who will literally contact you to have their lightbulbs changed.
Get used to this and be willing to accept the fact that tenants WILL cause problems for you.
You’re bound to lose money.
As the two aforementioned stories indicated, you’re bound to lose money. It won’t be all profit with your rental property.
You should be ready to lose money. Anything and everything can go wrong. You might have to perform renovations, you might have to fix something, or even worse — you might have a tenant who skips town and doesn’t pay the rent.
You won’t make a profit every month — or every year.
You should actually expect to lose money. There are zero guarantees when it comes to rental properties. You can’t assume that every year will be profitable.
A few possible issues that would result in the loss of money include:
- Not being able to find a tenant
- A tenant who damages your place
- General maintenance to the property
- Increase in maintenance fees
- Increased property taxes
- Economic downturn in the community
All you can really do is ensure that you have money saved up so that you’re not scrambling when things go wrong with your rental properties. I still cringe over the money that I’ve spent on issues that easily could’ve been avoided.
That’s the dark side of investing in rental properties that I felt compelled to share with you. My goal isn’t to discourage you. I just want you to walk in prepared for this investment.
Are you still ready to invest in rental properties? Can you deal with these possible issues? What are some unforeseen issues you’ve encountered?
Leave a comment and let me know!