First time investors may find themselves tempted to invest in these types of rentals due to a great price, or the promise of a speedy return on investment. There are several types of rentals that Starting Point Real Estate suggests you avoid when beginning your career in real estate, and here’s why!
The types of rentals that a new investor may want to steer clear of include multi-families in areas where there are a high concentration of rentals that are not around major employers, universities, hospitals, etc. as there may not be a large rental pool of tenants that want to rent, therefore you may have to decrease the rate of rent just to get a tenant in.
Low End Rental Properties
Many investors cut their teeth and get an education with lower end rental areas and find out they paid too much, or have too many headaches to justify the cash flow. This may be something you want to tackle because you’ve found a good deal. You can make money this way, but you will get an education!
Condo-plexes can be tricky sometimes too because you might buy something that can’t be rented, or only a certain percentage can be rented, and condo fees can eat away at profits and you have to plan for special assessments. Please make sure to do your due diligence on this before you buy into a condo-plex!
Commercial properties in a down turn of the economy tend to have higher vacancy rates; therefore they may not be the best type of investment that will bring in a large return.
Research every investment as though it’s your first. Consider the time and money that you can allocate to each property, each month- if you’re looking at a property that’s cheap but needs a lot of time and work, you may do better spending more money initially to avoid a lengthy rehab process. For more information on building a successful real estate portfolio, follow us on Twitter, Pinterest, and Facebook.