Most real estate investors always purchase property to operate them as rentals. This is a logical approach. And these investors understand the benefits of doing so. Besides, owning another home gives one the chance to save on rent while growing over the years. Nonetheless, investors seeking to put their money into different investment dockets in real estate, there are ways of coming up with favorable strategies. One such strategy is investing in a massive commercial real estate. According to Linkas, owning single-family rentals come with a lot of challenges including;
- Lack of Proper Cash Flow
If you are buying the house without debt, single-family rentals can be profitable. But in most cases, the buying process involves some debts thereby making it challenging for buyers to bet on the future of the market. Unless you are acquiring property without debt, then rentals are not sustainable.
- Highly Volatile
If the home is leveraged, owning single-family rentals need the investor to always prepare for 100 percent volatility in equity markets. This is sustainable especially in a market that is flooded by investors. Although they overlook this fact, they should concentrate on it because it contributes to their success or failure.
- Costly Management
Property owners have to manage their assets or assign a third party to manage. Typically, employing someone to handle the business means that they part with about 10 percent of the total income. That is costly as sometimes the manager is not up to the task.
- Market Dependent
When it comes to investing in assets, profitability is not the issue. Rather, it all depends on the overall market and different shifts. That is another risk that determines the success of rentals.
These challenges justify the need for investing in a diversified portfolio as it comes with the following advantages;
- Asset Value Correlation
The value of real estate property is directly interrelated with the operating income. This means that you can make more than you invested in the property. Also, you can make money irrespective of how the market is doing.
- Opportunity to Co-invest
When investors can embrace passive investing, it will be easy for them to seek reliable, sophisticated groups for business. This gives them the chance to mitigate their impending risks by working with like-minded individuals.
Chris Linkas is a revered investment advisor that has an excellent track record in finance and management. He has worked in different sectors for about 20 years and has the ability to offer insight into matters of business and saving.