Although rental properties can be great vehicles for generating passive income, you are by no means guaranteed to see a return on such investments.

Unfortunately, far too many fledgling investors purchase properties under the assumption that they can’t possibly lose money, only to wind up with an acute case of buyer’s remorse.

Whether you’re a first-time investor or you’ve been purchasing rental properties for years, it’s important to understand that success is never a sure thing. To help ensure that your next property investment doesn’t wind up losing your money, but the following pointers are to good use.

i. Plan for Periods of Extended Vacancy

It’s generally not a good idea to assume that a property will be rented in perpetuity. While some properties may rarely – if ever – find themselves vacant, most undergo periods of vacancy that can last months – if not longer.

This is due to a variety of factors that range from lack of demand to plain bad luck. So, even if you own an amenity-laden property in a highly desirable area, it is incumbent upon you to plan for extended periods of vacancy.

Sure, they may never actually happen, but in the very likely event that they do, you’ll be well-prepared.

Failure to build a robust vacancy fund may result in you having to sell a property for which a new tenant cannot be immediately found. To help ensure that you’re able to afford upkeep for vacant properties, make a point of contributing a small amount to a vacancy fund each month.

As you’ll find, a little bit of planning ahead can provide you with tremendous peace of mind. Investing in a good real estate investment trust (REIT) may also help you weather periods of vacancy with aplomb.

First-time investors wondering, “What is a REIT?” are urged to get in touch with a dependable investment trust.

ii. Don’t Invest in Properties That Haven’t Been Inspected

ii. Don’t Invest in Properties That Haven’t Been Inspected

Investing in a property that hasn’t been inspected is practically asking for trouble. Even if the property in question is located in a hot area, you may ultimately lose money on the investment if extensive repairs and renovations are required.

While not wanting to miss out on a big investment opportunity is perfectly understandable, most rental properties are too expensive to take such an enormous risk on.

To avoid investing in a lemon, make sure that any property you purchase is thoroughly looked over by seasoned building inspectors, plumbers, and electricians.

Given how much capital is at stake, it’s in your best interest to confirm that you’re getting the most for your money.

iii. Be Extra-Thorough When Reviewing Renter Applications

Be Extra-Thorough When Reviewing Renter Applications

Late-paying and non-paying tenants are among the most common sources of lost revenue for property owners.

Additionally, depending on where you’re based, evicting a tenant for habitual non-payment may be next to impossible. With this in mind, make a point of being extra-thorough when reviewing applications from prospective tenants.

Weeding out potentially problematic tenants at this stage stands to save you a fair amount of time, money, and hassle down the line.

If a prospective tenant’s credit history is troubled or they’ve had difficulty paying rent in the past, it may be a good idea to move on to the next application.

Having less-than-stellar credit or a history of evictions doesn’t make someone a bad person, but if you’re going to take a chance on them, just be aware that you stand to lose a considerable amount of money as a result.

iv. Become Familiar with Fair Housing Laws

Failing to familiarize yourself with fair housing laws can cost you a significant amount of capital. If you’re found to have rejected or evicted a tenant on unfair grounds, you may find yourself in hot water – both legally and financially.

Brushing up on the aforementioned laws in advance of purchasing your first property can prevent you from making a variety of costly missteps during the screening process and in your interactions with problematic tenants.

If you’re looking for effective ways to generate passive income, rental property investments are certainly worth considering. Of course, this isn’t to say that every foray into rental property owners will be a guaranteed money-maker.

As is the case in many areas of life, one’s success with rental property investments depends upon a variety of factors. New investors who are determined to avoid losing money can benefit from the tips discussed above.

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