Real estate investing has the potential for high returns, but like any lucrative investment, it also comes with risk. Imagine if you'd been heavily invested in vacation rental property during the COVID-19 lockdowns. A once-profitable arrangement could've become a money sink overnight.
Smart investors realize that risk exposure is part of the game. You need to diversify your investments to become resilient to economic shocks. Many investors choose to work with experienced property managers to help them create a diverse portfolio in line with their risk appetite. Read on to find out more.
The Risks of Bad Tenants
While you should be concerned about the impact of global economic shocks, one of your biggest potential risks is much smaller in scale. Bad tenants can really mess up your investment.
Bad tenants don't manage their finances well, so they frequently can't pay rent on time. They could also cause damage to your property through negligence or even deliberate vandalism.
While these infractions might be a breach of lease, the eviction process can be long and hard. Good property managers will protect you from the risk of bad tenants. They'll implement robust tenant screening checks, so you'll only rent to tenants who respect your property.
Emergency Preparedness
Another big part of investing is being ready for an emergency, crisis, or unexpected event. Unlike more abstract assets like stocks or bonds, real estate involves investing in a tangible object. This means natural disasters, extreme weather, and other unexpected developments could pose a serious risk.
Think of disasters like Hurricane Katrina. Many residents in New Orleans took a huge risk by not having property insurance covering flooding and hurricanes.
The good news is that property managers are pros at helping you insure against these kinds of events. In the event that a disaster strikes, they can also help you take the best steps to protect your investment.
Maintenance and Repairs
Even if you're safe from extreme weather, you'll still need repairs and maintenance on your property. Through wear and tear, all buildings degrade over time. If you ignore small problems like cracks in the walls, you could end up with a huge emergency, like damaged foundations.
By keeping an eye out for small issues, you can maintain the building before you get to the point of requiring emergency repairs. A property management company plays an instrumental role in ensuring you get the best contractors to maintain your building.
Legal Help
Diversifying your investments is a crucial way to reduce your risk. The trouble is, if you invest in various legal jurisdictions, you increase the risk of accidental non-compliance with regulations.
By having a property management company on your side that has knowledge and experience in handling local laws and lease terms, you can rest assured that you're always making legitimate investments.
You Need Property Managers on Your Side
If you want to make the best investment decisions, you have to base those decisions on the best information. Working with local property managers is an effective way to reduce your risk exposure.
Wilkinson Property Management is a property management company with decades of experience navigating the risky world of real estate investment. We have countless satisfied clients, and we're here to help you minimize your risk. Contact us today to learn more.
