I hope this helps those interested: Theres more where that came from, linked.
Reason 1 Maintenance Nightmare
Imagine your retirement days enjoying your time with your family and getting a call from a tenant asking you to go fix a broken toilet. Better yet you're enjoying a nice stroll on the beach with your better half and you get a call from a tenant complaining about noise issues at your investment property. As rents increase in the state of California so do headaches that come from stressed out, underfunded tenants that have problems. Passive rental properties are management nightmares and should be avoided at all costs.
Reason 2 Low Returns
As treasury yields barely hit 2% in the US, rental real estate investor in California are barely seeing returns much over 4% on an annual basis. An investor may be able to obtain higher returns in low income markets, but have to tolerate more headaches. Rental Real Estate Investors don't make any income but take a significant amount of risk and the payoff is not worth it.
Reason 3 Tenant Screening
Craigslist and other marketing websites on the internet breed tenants with bad history. More specifically, a comprehensive criminal and civil background check must be conducted in order to obtain information which may predict the successfulness of a prospective tenant. Prospective tenants have been known to change names and use other individuals information, falsify identity, and obtain a long-term lease on a rental. Once in a rental the tenants begin to ask for repairs which may not be necessary. These requests lead to higher maintenance time and operating costs for the owner and investor of the property. This leads to lower income and more pain in your wallet. Tenant screening is almost impossible in California and landlords are always at a disadvantage.
Reason 4 No Liquidity
Real estate is not considered a liquid asset. It takes time to sell real estate you cannot just put it on the market and sell in a few days and get all of your money back. Micro and macro markets fluctuate on a regular and consistent basis. Investor must be prepared to tolerate declining and depressing real estate values. Rental real estate Investments are not liquid you should plan on losing that money for a long, long, time.
Reason 5 Increased Risk
Professional Real Estate rental Investors pontificate using leverage to enhance returns On rental properties. This enhanced leverage leads to higher risks when property values decline. As property values decline Tenant credit quality get eroded dramatically hands leading to situations with tenant stop paying rent on a timely basis thereby increasing pressure on the owner. During these times vacancy rates increase thereby leading to higher absorption of losses. Rental real estate Investments have a high rate of risks which are not considered by rental investors at purchase.
Really hope this helps! Here's a link to my other articles: http://ift.tt/2sGst0l
Submitted July 03, 2017 at 07:42PM by BirchCap http://ift.tt/2taXPQ1
