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4 harsh truths about residential property investments

By Andrew Bell

Getting into the residential property investment game may be a great financial move for many people, but if you're thinking about taking that step, you need to be aware that it's hardly a risk-free field. Anyone who's spent time in the business can tell you one simple truth: The idea that you can just buy a property, find a tenant and rely on it as a source of "passive income" in perpetuity is fanciful at best.

Instead, you will likely have to deal with some ups and downs over the course of months or years, including the following:

1) Purchase prices have to be considered carefully

When you're first buying a home or building strictly for investment purposes, you need to think hard about how the price affects your return on investment in the long run, according to Your Investment Property magazine. At a minimum, this kind of purchase requires you to set aside tens of thousands of dollars, so you need to crunch the numbers and find an option that works for you financially.

2) Not all tenants are great to deal with

Once you have the property available to rent, you are likely to get some tenants who aren't ideal. They may complain a lot, damage the property, pay their rent late (or fall behind on it) and so on, and that's all par for the course in property management.

3) There will be lean times

When you rent out a property, you aren't always going to keep your tenants and the building isn't going to stay in perfect shape forever, according to Naked Real Estate. There may be some months when there's nothing wrong and your income is close to being pure profit. However, there will also be plenty of times when you have to take on a major repair cost, or the property has at least one empty unit, and you have to plan for those financially difficult periods.

4) You will have to invest in improving your properties

Whether it's paying for repairs, improvements or simple maintenance work, the cost of maintaining a property may be more than you realise in the long run. As such, you should always have some money set aside to cover those costs that aren't picked up by insurance. That way, no matter what happens, you will be financially prepared.

If you want to be sure you're making the right investments, whether you're expanding your portfolio or just starting out, you need the experts on your side. At Ray White Surfers Paradise, we can help you navigate the sometimes thorny world of residential property investment. Give us a call today.

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