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That’s probably the one factor most people don’t take into consideration. If you have to relocate to another city and leave your rental property for somebody else to manage - you’ll find that your positive cash flow property goes negative cash flow in a New York minute. Professional management by a real estate agent can cost an arm and a leg. And you’ll definitely have to hire help to do a lot of the maintenance work you used to do.
6. Another Money Pit
It’s not only your fifteen year roof that starts leaking on its fifth birthday. That huge sucking sound happens with rentals too. Be prepared to double your emergency funds for dealing with major repairs. Seriously, the first year your smiling because you have such wonderful cash flow. The second year you have 5 repairs to make and the third year you get a major renovation. Things break and you'll rapidly suspect that your tenants just take lousy care of everything. Either way, you're responsible.
7. Complaints - From Their Neighbor
Your tenant’s neighbor will have an earful every time you show up on the property. If your tenant doesn’t get along with the guy next door, you’ll hear about it early and often - from both parties. The fact is that your tenants may be wonderful cash flow for you but your neighbor is forever pissed off that you somehow picked the worst possible renters. Take a counseling course or learn to be a mediator before you have to sign up for expensive therapy sessions.
Rental real estate is not illiquid but it might as well be. It can take a year or more to sell in certain markets. And you’ll have to sell the house with the tenant in it. Don’t expect a bonus for the tenants or their kids. Chances are the only buyer will be a sharp real estate investor on the hunt for a great deal. Owner-occupied homes fetch a premium and are easier to show. Your tenant won’t feel obliged to bake cookies or hold open houses for prospective buyers. He might even set the dogs on them. Tenants can be very territorial that way.
Rental real estate can pave a path of roses to a nice retirement nest egg but you might end up spending your golden years in an insane asylum. If you are considering becoming a landlord, you might want to check out these articles:
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