Major Reasons Why Some People Fail at Rental Property Investing
Some people who venture into rental property investing have so much hope to succeed in the future; they even acquire a rental portfolio that is good enough to take make them succeed. However, they end up failing at rental property investing after losing most or all of their investments/properties to foreclosure, even to the point of filing for bankruptcy.
In other cases, after years of hard work, some rental property or real estate investors witness how all their investments come crashing down to such an extent that they aren’t able to recover and become active in rental property or real estate investing.
If rental property or real estate investing is a promising venture that has made many people wealthy, why do some people fail at it? What have successful rental property or real estate investors done and avoided in order to succeed at investing?
For a number of reasons, investors usually make mistakes and fail at rental property investing. To avoid wasting time and effort and also avoid experiencing failure after putting in hard work, investors have to pay attention to the following major reasons why some people fail at rental property investing:
1. They don’t have enough education
Anyone who is interested in venturing into any endeavor should have appreciable, sufficient, or—if possible—solid knowledge or education about it, especially before diving deep into it.
Apart from knowing the benefits of real estate as an investment, investors should be educated enough and have sufficient reasons for investing in rental or real estate properties.
Without much consideration, understanding, forethought or planning, some people assume that rental property investing is the right path for them; as a result, they make the grave mistake of jumping into rental property or real estate investing with little or no understanding about what they are doing or what they need to do to succeed.
Worst still, some investors lack enough education about real estate or rental properties, so they make wrong or detrimental decisions; for instance, they repeatedly buy wrong properties in wrong areas and finance them with wrong types of financing.
A lot of investors wrongly assume that they will succeed at rental property investing just because they are renting or leasing properties. Also, a lot of investors wrongly assume that they will succeed at real estate investing just because they are buying and selling properties.
Investors need an appreciable amount of education which should be adequate enough to help them succeed. Thousands, hundreds of thousands, or even millions of dollars don’t have to be spent in order to get adequate education.
Sometimes, getting knowledge and experience from the right person or people could provide enough education. Education can also be acquired by reading books and blog posts, attending offline or online forums, watching or listening to podcasts, and getting access to other low-cost educational resources.
2. They don’t make sufficient analysis
Some investors don’t analyze numbers and read between lines before buying or investing in properties: they make some big mistakes because they invest hastily or carelessly without carrying out sufficient analysis.
Without adequate analysis, it will be difficult for an investor to make an approximate or a precise estimate of the profit that could be generated from an investment. Although it’s not always possible to know future outcomes, it is much easier to predict outcomes or know what to expect if solid analyses are made.
3. They take too much risk
Although risks are inherent in every type of investment, there is always an extent or point at which risks can become too great, unbearable, and detrimental and lead to complete failure.
For example, it might be too risky to buy many properties, too fast, without forethought and adequate education, and also without making sufficient or thorough analysis.
There might be too much risk in deciding to over-leverage properties by getting involved in too many low-down deals that won’t be considered as deals at the end of the day. Also, it might be too risky to consistently refinance properties, pull out all equity, and invest in other properties.
Most failures are tied to risks which become evident reasons for failure when the chips are finally down. Investors should never forget that investing can be risky and any risk associated with investing is a powerful but dangerous tool that has to be used with caution.
Investors can avoid detrimental risks by investing only in properties or deals that can be regarded as 100% safe after analyzing them.
4. They don’t take their investing business seriously
Some investors don’t treat their business with the utmost seriousness that it requires—they don’t treat their business like a business; as a result, they fail at rental property investing because their approach to investing was faulty right from the very beginning. Failure from lack of seriousness shows in the end results they get after investing.
Some investors are not serious or disciplined enough to handle their business: they are late at doing everything; they don’t contact people enough, even when they have enough contacts; they don’t tie together well-known schemes that can help their businesses grow; they don’t have rules for getting good tenants; even when they do, they allow tenants to make late rent payments or deteriorate the condition of rented properties; etc.
Any investor who wants to avoid failing, should take their rental property business seriously by consistently monitoring every aspect of it, hiring the right people to do the right jobs, doing every necessary thing at the right time, and always looking for ways to improve in order to create a long-lasting rental property business.