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6 Signs Your Real Estate Investment Is Becoming A Liability


August 13, 2021 ( Newswire) Real estate properties can be great additions to your investment portfolio. They can give you access to a number of benefits such as added income and tax incentives. But what happens if your real estate investments aren't turning out as profitable as you expect them to be? It's possible that instead of serving as a source of extra funds, they're causing you to lose money.

With that said, here are some signs your real estate investment is turning into a liability:

1. You Can No Longer Afford The Maintenance And Renovations

As much as you might hate them, maintenance and renovations are part of the costs associated with owning real estate properties. As a real estate property gets older, it'll cost you more to maintain it. If you see that your profits are diminishing while your maintenance and repair bills are growing, you should ask yourself if this pattern is going to be a trend from now on.

Having to fix one thing after another is not only extremely costly but also frustrating. The time one has to spend and the stress they have to deal with because of costly maintenance, repairs, and renovations can be overwhelming for many real estate investors. Your real estate investments should be a source of profit, not trigger more financial problems and headaches for you.

It could be that you've been putting off maintenance on your rental property because your tenant has occupied it for many years and never complained about anything. But now that your tenant is moving out, you no longer have the funds to cover the repairs and upgrades you've ignored for several years.

If you're unable to make those necessary repairs and upgrades, you might not get another tenant to occupy your rental property. If that's the case, it's best to just sell your real estate property to another investor as it'll only become a liability.

2. The Real Estate Property Is In A Bad Location

Another sign that a real estate investment is disadvantageous is if the property is in a bad location. Real estate experts such as Peregrine Private Capital have said that buying real estate is all about location. It doesn't matter if the property is big or small-if it's in an unappealing area, there's a good chance you'll eventually lose money because of it.

Is the property in the middle of nowhere? Does it entail an extra-long commute? Are there any schools or access to public transportation nearby? You should take these things into consideration before you invest in a real estate property if you don't want your money to just go down the drain.

To prevent that from happening, you should make sure that the property you're going to invest in is in an excellent location. Check to see if it has access to schools, public transportation, and other businesses nearby. You might also want to consider the crime rates, changes and upgrades made to the property, and year-to-year value of the properties in the area.

3. Negative Cash Flow

Real estate investing will always have ups and downs. Dealing with those is part of being a real estate investor. Look at the patterns of your cash flow. Does it fluctuate often? If you see that you have negative cash flow or you're having problems with retaining tenants, it's a sign that your investment properties are becoming a liability.

Most people invest in real estate because they want it to be a source of a steady stream of extra income. But if you're losing money from your investment properties instead of earning, that's a warning sign. Negative cash flow can be caused by a variety of reasons, including a drastic change in the real estate market.

One of the main reasons a real estate property has negative cash flow is the kind of tenants you have. Many landlords prefer to rent out their properties to families and individuals who live nearby. This can be beneficial for you as long as you make sure that your tenants are able to achieve and maintain the standard of living that was promised to them prior to moving in. Unfortunately, there are irresponsible tenants that might occupy your rental property. These people will usually end up damaging the property, resulting in negative cash flow.

It'll be up to you whether you'll hold on to those investment properties or sell them to seek out other investment opportunities elsewhere. Do note that there are still many investment options out there, and you can use the cash you get from selling your underperforming real estate properties to turn your situation around.

4. Being A Landlord Is Giving You Too Many Headaches

As a landlord, you're probably already familiar with the daily requirements of managing a rental property.

For example, landlords have to worry about emergency maintenance calls, which usually don't abide by regular business hours. Because of that, they have to be ready to answer their phone at all times, and this might take a toll on them in the long run, especially since there are many other things they have to deal with every day. If you've been a landlord long enough, you'll surely have your own share of headaches.

A lot of people invest in real estate with idealistic dreams and hopes. Unfortunately, things might not necessarily turn out the way you expect or want them to. It may be time to sell your rental properties if they've become a liability and are giving you a lot of trouble, such as the following:

  • Being a landlord has put so much toll on you that you find yourself overworking often.
  • Your tenants are causing you all sorts of problems.
  • You've been forced to become a full-time landlord so you can address all the real estate-related issues on your plate.

Landlord problems aren't just limited to your tenants, of course. You also have to handle maintenance and repair issues as well as natural disasters such as floods and earthquakes.

If you think that all the stress you're getting from your rental property isn't equal to the revenue it provides, then perhaps it's time for you to sell it. This is a good thing to do if you no longer want to deal with the pressure of having to maintain a proper living space for your tenants, or if you're already tired of arguing with stubborn tenants.

Being a landlord requires a great amount of patience. If you feel that you're no longer enthusiastic about what you're doing, you'll feel much better if you sell your rental property and look into another venture you can take on.

5. You Live Far From Your Property

Being a remote landlord usually doesn't work. Although there are some real estate investors who hire a property manager to oversee their investments, not everyone can afford that. Paying for a property manager can be expensive, so it's not an ideal option for all real estate investors.

Managing your real estate investments from afar can be challenging. Handling tasks such as property showings, checking on the property, tenant screenings, and building a relationship with your tenants is almost impossible if you don't live near your real estate property.

Living far from your property presents a multitude of problems for you as the owner, making it a liability. If you think that managing your property from afar is too much for you, it might be best to sell it and consider investing in real estate properties that are much closer to your residence.

6. Your Property Is No Longer In Good Condition

A real estate property is considered to be worth a lot when it's in excellent condition. This doesn't mean that everything needs to be in perfect order, but it does mean that the outside shouldn't be badly damaged and should be structurally sound.

The same holds true for the interior. No one will be interested in renting your property if its interior is falling apart. Minor dents and wear are acceptable, but major damage like holes should be repaired right away. You also have to look for leaks and any other kind of major damage that can make the place uninhabitable.

When you find that your real estate property is no longer in good condition, you have the option of selling it. Many people are reluctant to part with their real estate investments because they're afraid that they may never find a similar opportunity again. But if you do some research, you'll discover that plenty of other investment opportunities are out there waiting for you. If you feel that you've finally reached a point where you simply can't deal with the condition of your real estate property any longer, you may want to consider putting it on the market.

Final Thoughts

These are the most common signs of a real estate investment becoming a liability. When these issues start to come up, you need to act quickly. It's important that you work with a professional who's experienced in checking for and assessing all of these signs. They'll be able to help you figure out what's going on with your real estate investment and make a good decision on what to do with it.

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