Real estate investments are known to be a great way to diversify your investment portfolio. They are also considered a comparatively risk-free way to build equity and generate regular income. However, there are certain pitfalls associated with real estate investments that many investors fail to recognize until they are required to deal with such situations. Let us take a brief look at some such situations to be wary of while investing in rental properties.

Problematic Tenants

Your cash flow from rental properties would take a hit if you rent out to a problematic tenant. It is not very rare that a tenant would refuse to pay rent. You may have to take the matter to court to get it resolved. This would take up a lot of time and money in legal fees and other expenses before you can get rent from the tenant or evict them from the property. The unhappy tenant may leave your property in a bad condition that might require you to shell out quite an amount for repair and maintenance work.

Sometimes, a tenant who pays rent regularly might leave the property in a less-than-ideal shape, making you spend a good chunk of your rental income on repair work. This is especially true when your rental property is in a state with “tenant-friendly” laws. There are so-called ‘professional renters’ who are capable of working the legal system in their favor while defaulting on rent and costing you a huge amount. The best way to overcome such issues is to get professional help from a team that includes an experienced real estate agent and a lawyer well-versed in the various legal aspects of rental property management.

Investing In The Wrong Property

If your rental property is not in an ideal neighborhood, it may not be easy to get renters on a regular basis. A few months of the property being listed with no takers is a situation no property owner would want to get into. A few months’ hiatus in the rental income flow could mean heavy losses to the property owner, especially if there is a mortgage that needs to be paid monthly. Keeping a sufficient amount as a reserve for such monetary needs would help face such unforeseeable situations in a better way.

Rental property investment is an ideal way to generate a fixed monthly income. A fair amount of research and caution can help ensure that you get good returns for your investment and that your property management remains hassle-free.