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Revealing the Main 10 Risks Associated with Owning an Investment Property


Are you thinking about investing in a property? Well, you’re in for a lot of returns… but hold up! Before you dive into it, you need to know the risks involved in owning an investment property. It’s not all sunshine and rainbows. Investing in a property requires research, knowledge, and preparation. In this blog post, we will be revealing the 10 main risks associated with owning an investment property. This will give you a better understanding of what you're getting into and how to manage the risks.



Market Risk:


The property market is constantly fluctuating, and it’s important to keep an eye on the market trends and movements. This will help you assess if it’s the right time to invest or not.

It is critical to research the current market conditions and determine whether they are favourable enough to invest in. You need to take into account different aspects such as property prices, potential renters, location of the property etc.


Tenants Risk:

Finding the right tenants can be nerve-wracking, and it can affect your cash flow if tenants aren't paying their rent on time. Ensure that you have proper screening procedures in place to minimize these risks.


If you end up with a bad tenant, you may have to go through the eviction process which can be quite expensive. Tenants can be quite difficult to deal with, and it’s important to have a plan in place for dealing with them.


Maintenance Risk:


As an investor, it’s vital to keep the property in good shape, maintain its value, and avoid costly repairs. Unexpected repairs can significantly affect your returns.


It’s important to set up a maintenance plan for the property and keep track of any repairs that need to be done. It’s also important to ensure that you have the necessary insurance coverage in place.


Liability Risk:


As a landlord, you are responsible for tenant safety. If a tenant is injured on your property, you could be held liable to cover their medical expenses and other losses. Buy landlord’s liability insurance to protect yourself.

You can limit risk by making sure all the appliances in your property are up to date and regularly maintained. You should also ensure that smoke detectors, fire extinguishers and other safety equipment are working properly.


Interest Rate Risk:


Interest rates play a significant role in managing the cash flow of investment properties. If the interest rates go up, your mortgage payments increase, and your returns decrease.

Natural Disaster Risk:


There’s always the risk of a natural disaster such as floods, fires or a tornado that can cause damage to the property. Be sure to have the right insurance coverage that covers such disasters.


Vacancy Risk:


Simply put, if your property stays vacant for too long, you lose money. Aim to reduce the vacancy rates by identifying and addressing tenant issues quickly. Making sure you have a proper marketing system in place to attract tenants is important to help mitigate this risk.


Property Management Risk:


If you don’t have the right property manager, a lot can go wrong, such as not keeping up with repairs or improperly screening tenants. Reference-check all potential property managers and hire one with a good track record.


When hiring a property manager keep the following in mind:


• Their experience and credentials

• Their portfolio of properties

• Their communication style and level of professionalism


Location Risk:


Do research on the location of the property carefully. Investing in a high-crime, poorly maintained, or a declining neighbourhood can affect its value and your ROI.


Inflation Risk:


Inflation can seriously affect your returns on investment property. Inflation reduces the returns of fixed investments, which is what an investment property is.


Conclusion:


Investing in an investment property can be a very lucrative venture, but you have to understand that it’s not without its risks. The above ten risks are just the tip of the iceberg, and there are many more that you should be aware of. Taking steps to mitigate these risks can help you avoid potential costly mistakes. Do your research, obtain the right insurance, and enlist professionals to help you manage your property. Let’s not forget that purchasing, owning, and managing an investment property takes work. It takes more than just money. It takes time, energy and most of all, effort, but the payoffs can be significant. So, are you ready to dive in?

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