Property investing has become a booming business over the past decade. Investors have helped stabilize the housing market after the housing crisis of 2008. But what happens to investing in property during a seller’s market when home prices are skyrocketing?
We’re also still amidst the pandemic where investors had to deal with the government-issued moratorium on rents. In September 2021, restrictions on evictions were lifted. Investors are now faced with whether to evict delinquent renters or continue to work with them.
As you can see, property investment challenges are real. They come with many risks, the same as any other investor would face. The goal is to minimize risks and to readjust your buying strategy.
Are you considering investing in property as a new stream of income? Before you purchase, keep reading to learn about seven major challenges and how to overcome them.
1. Property Investing Amidst Limited Inventory
Geographical location is important when it comes to investing in property. Being a property owner and renting the unit out is one thing. Going out and looking for properties with the goal of being a property investor is different.
If you’re looking in an area with limited inventory, your chances of success are limited.
Experienced real estate investors don’t place all of their eggs in one basket. They understand there are global opportunities. You can expand your portfolio by going to different cities and states to get the best deals.
Before starting your investment business, do an analysis for the areas you want to make investments in. Check to see if inventory is down and if there’s is a spike in home sales.
2. Access to Funding
Not every property investor has access to unlimited funds. Current investors have taken a hit to their portfolios because tenants have been unable to pay rents over the past 18 months. Although rent revenue decreased, the management and upkeep of the property continued.
This, in turn, became a real property investment challenge.
As a new property investor, you need to have a path to immediate funding. How will you access additional cash if your money is tied up in a renovation or pending contract? Properties become available without notice.
Can you close quickly on a traditional loan? Or will you rely on private investors who make their money lending to property investors like yourself?
3. Navigating a Seller’s Market
Whereas some areas of the country have a housing shortage, most are experiencing a seller’s market. This means locating a good rental property at a reasonable price is limited.
Homeowners are getting top dollar for their homes. In some areas, bidding wars are driving up the cost of available inventory. This trend spells bad news for individuals wanting to get into the property investment business.
One way to navigate a seller’s market is to partner with a real estate broker. The advantage of doing so is you’ll get access to off-market listings.
4. Managing the Properties
After you’ve made a purchase, the next step is to decide if you’ll manage the property. The alternative is to hire a property management company. Doing so frees up your time to focus on growing your portfolio.
A property management company is a real estate investor’s greatest opportunity for a successful rental property business. The goal is to choose the right company.
You can hire a property manager who acts as a landlord. You’ll want someone who can screen applicants, collect rents, maintain properties, and know the rental industry’s legalities. Or you can contract with a firm that specializes in property management.
5. Keeping up With Government Regulations
Government oversite is changing as it pertains to rental property. Property investment challenges become costly when government regulations enter the picture.
The growing demand for affordable housing is causing property investment challenges nationwide. Local, state, and federal governments are looking for ways to slow down property investors buying available inventory.
In the state of Florida, when rent control is prohibited, local municipalities are making use of exemptions by issuing a state of emergency on housing. The current administration is also looking into regulations that would push property investors to the back of the line.
On top of these proposed changes, investors must stay on top of the maintenance for their properties to avoid code violations. Fines can mount up and, if left unpaid, can lead to a lien against the property.
6. Choosing the Right Tenants
If you hire a property management company, one of its duties is to screen potential tenants. Since you’re just starting, you may not be in a financial position to hire a management company. It would be best if you still were diligent about choosing renters for your property.
Some companies run background checks for renters. They can do credit, employment, and criminal backgrounds. You also want to know renter’s past histories and whether they have evictions.
Choosing the wrong renter can turn into a costly mistake.
7. Competing With iBuyers
Technology has disrupted many industries. Property investing hasn’t been spared. Investors now have to compete with ibuyers, or instant buyers.
Realtors and brokers use software and analytical data to buy and resell homes quickly. A potential buyer can access new listings and make an offer within hours of a listing.
Buyers can also bypass agents and use the ibuyer platform directly.
There’s Still Money to Make in Property Investments
Don’t shy away from property investing as an extra stream of income. As long as people need housing, there is money to be made. Your goal is to work around the challenges and develop creative solutions.
We hope you found the information in the article useful. If you need more tips and information on real estate, check out our other great content and informative articles.
