Interest in real estate investments remains high. Many people no longer want to settle for the low daily or fixed interest rates and therefore prefer to invest in concrete gold. This refers to the purchase of real estate in order to rent it.
However, such investments also involve risks. In today’s post, we want to show how the biggest stumbling blocks are. Anyone who wants to buy and rent a property should know these dangers.
Threatening rental loss
It can happen at any time that a tenant moves out of the house or apartment. Ideally, it will be possible to find a new tenant in time so that the rental income continues to flow without interruption. But sometimes it happens differently, especially as a result of a loss because of other reasons, for example because the tenant is in financial difficulties and the rental payments simply can not spend.
In this regard, the hedge should necessarily be made. Temporary leases may not threaten the landlord financially. It is advisable to select tenants specifically. It is also advisable to make reservations. In an emergency, it is possible to continue to spend the loan installment, and if necessary, cover further costs.
Existing investment backlog
Many a bargain property has turned out to be an expensive refurbishment property after the acquisition. In some cases, capital investments may be threatening after a short time, making the investment considerably more expensive. For example, those who purchase and rent an apartment in an apartment building must reckon with the fact that the owner community decides to energetically renovate the property.
This risk can also be reduced. For example, it makes sense to put part of the rental income aside as an investment reserve every month. In addition, it is always good to have items checked by an expert before purchase. An expert can determine if there are any major investments in the near future and how much they will add up.
Low loan repayment
Many private real estate investors choose to finance a low-repayment loan. Often, only the minimum repayment required by the bank is agreed, which amounts to 1 to 1.5 percent of the original loan amount.
If you pay little, you can save taxes for a longer time, but in return you will reduce the total return on your investment. Therefore, we could only encourage all potential real estate investors not to limit themselves to the minimum repayment. Further information has been compiled in this article.
Also a risk: buying property at high cost
The low interest rate has driven real estate prices. In most regions of Germany the currently required prices are to be classified as justified. On the other hand, there are now some regions in which the property prices have been reached, so that financially strong professional investors pull the emergency brake and look for objects in other regions.
In view of this situation, it is crucial to question demanded purchase prices and to accurately determine the return that can be achieved. If you buy at any price, you may make a wrong decision that will cost you dearly later.
Assistance with financing
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