Long-Term Commitment

In order to make money from rental properties, you have to remain committed to your business in the long run. You have to make sure that your property is in a good state, that your property is not vacant, that your tenants are happy and paying the rent on time, that your property and income tax as well as insurance are taken care of, and the list goes on. Being a landlord is not only an investment but also a job. It is true that you can hire a professional property management company to do most of these tasks for you, but you will have to split your profits with them. Nevertheless, it might be worth if you don’t have the time and/or energy to deal with all the responsibilities of a landlord.

Mortgage Payments

Unless you are already rich, chances are that you will have to take out a loan to buy your investment property, and you will have to pay back for this mortgage no matter what. Maybe rental rates might go down in your location. Maybe you land on bad tenants who refuse to pay the rent. No matter what happens to you as a landlord, you will have to find the cash to make your monthly mortgage payments. Otherwise, you run the risk of losing your property to the bank.

Dealing with Tenants

Regardless of whether you opt for professional property management or not, you will still be very much dependent on your tenants. They might destroy your property beyond reason. They might stop paying the rent on time or at all. They might break laws within your property… So, you have to be able to deal with a wide range of potential issues before deciding to rent out your investment property and become a landlord.

Fluctuations in Rental Rates

Both property prices and rental rates tend to go continuously up over time. However, this doesn’t mean that temporary dips are not possible. The rents in your area might easily drop down for a year or two and leave you with less money to make your mortgage payments and cover your rental expenses. Thus, it is always recommended to have some cash set aside for when you might need it as a landlord.

As you see, both flipping and renting out your investment property have their pros and cons, and it is not possible to say which one is the better real estate investment strategy. It depends on your personal preferences, your financial situation, and your market among other factors.