People go into real estate because they know that there’s money from rental income. However, some realize they are not making any money and the investment quickly becomes a liability. They are constantly asking themselves what could be causing this.
The price of your property was too high.
If you did not do your homework, you will find that the price you paid for the property was too high. You will, therefore, end up not making money because no one will be willing to pay high rent. This is especially true in a situation where the competitors are charging much less for the same property yet; you cannot afford to charge the same because of what you bought it for.
The result is that you not be able to get any tenants forcing you to lower your pricing thus a loss to you. Make sure you know the value of the house or property before you buy so that you can charge the right amount in rent.
You are charging too little as rent.
Once again it comes down to whether you have an understanding of how rental property works. If you charge very little, you will not make any money. Talk to people who are in the industry like the real estate agents or realtors so that you can know how much you need to charge for your property.
When your turnover is too high.
If you keep on losing your tenants, you will find that you have long periods when your property is vacant thus no income. Make sure you do a thorough screening of your tenants and see if the people are capable of signing long term leases with you. Also, make sure that the property gives the tenants good value in that you maintain the property well and respond to any issues the tenants may have.
You are spending too much, or too little on upgrades.
In an effort to make your property more desirable, you may find that you are always doing renovations or upgrades which cost a lot of money thus a negative impact on the net income from your property. Let your lease be clear that you will only take care of certain repairs and anything that occurs due to the negligence on the part of the tenant is their cost. Look for contractors who give fair pricing on repairs and shop around for affordable supplies.
With that said, you also need to make sure that you maintain the property well, doing shoddy work so that you do not spend a lot of money will result in situations where you keep on doing repairs on the property. Make sure any work done on the property is top quality and the material is durable.
Remember one of the greatest tools you have is word of mouth referrals and if nothing positive comes out of your tenant’s mouth, then other people will shy away from dealing with you. Take care of your property so that get market rate rent, as well as avoid the high turnover of tenants.