Having some extra properties that you can give for rent and having some extra income from that can sound like an appealing idea. But when you are considering the many advantages of having apartments for rental use, you need to think about the various disadvantages as well. Some of these can affect your rental unit in a negative way and empty your bank account easier than you think.
Being the owner of apartments for rent in Asheville NC is not as easy and free of hardships as many think. Lenders consider investment properties more risky because the owner will not be occupying the building and these kinds of properties have different underwriting requirements and guidelines. Usually higher down payments and interest rates are incurred for this kind of investment. Interest rates can fluctuate with conditions of the market and down payments of 20 or 30 percent of the total price are very common and these can negatively influence your cash reserves and the monthly cash flow.
If you are financially insecure you might want to rethink buying a rental property. While cash is a liquid asset that you can use whenever you want, that is not true with rental property. Real estate cannot be converted into cash immediately as it might take months or even years to sell a house. So if money is tight then buying real estate as investment might not be the perfect idea.
Unexpected expenses are expected to appear regularly when you are rental apartment owner. You are responsible when taxes go up of something breaks down and you will also be responsible for routine maintenance. Fixing a toilet or replacing a fixture might not be a big expense but a leaking pipe can cause catastrophic damages. You need to be prepared for such unexpected issues and for that you might want to create an emergency budget that can help you reduce financial stress. You might find it useful to add a sum to that budget every month.
Collecting the rent is a constant challenge for landlords, especially in our times of high unemployment and financial instability. Whether your tenant can pay the rent or not, you are responsible with paying mortgage every month. So it is absolutely necessary to have written rental agreements with every tenant. It must contain clear information about rent collection, late payment penalties, what means late rent and what happens if rent is not received. The tenant must sign the agreement after reading it and fully understanding every detail. Eviction is frustrating, tricky and stressful and it will cost you money and time. Delays can occur because of procedural mistakes. Even if the court rules in favor of the owner, the tenant might not be able to pat and you will remain with a deficit. Not to mention that some evictions might be followed by violent confrontations.