Owning income property brings about an attractive offer. By renting out a home, the money from the tenants creates a passive income stream. Passive income allows the property owner to earn money while seemingly not doing very much. In some cases, this is exactly how things play out. Assuming that renting out property only has upsides and easy money wouldn’t be correct, though. Quite a few possible drawbacks exist.

No Equity Guarantees Exist

Purchasing an income property requires taking out a mortgage. The mortgage is based on the value of the home. The assumption is the value of the property will increase. No guarantees exist that an income property’s worth only goes up. In fact, you may purchase the property and see the value decline and decline greatly. This is an outcome a buyer must think about before committing to a purchase.

Troubles with Renters

No matter how many steps you take to make sure the person renting the property won’t cause trouble, as with equity concerns, there are no guarantees how things will work out. In fact, the renter could turn out to be a nightmare. He/she may move out while owing months of rent. Worse, the renter may cause severe damage to the property leaving the owner with all the expenses. Suing someone who has no assets won’t help the matter.

The Return on Investment Issue

The income property comes with costs. Insurance and mortgage payments are only two of them. The monthly rent must exceed the costs going into the home or else the whole endeavor becomes a money loser. It might even turn out to be a big money loser.

Before making any definitive steps to purchase an income property, a lot of work must go into determining the realistic return on investment. Rushing into purchasing an income property can turn into a financial disaster when things aren’t thought about properly. Gross and inaccurate estimates won’t help matters. Quite the opposite, poor math regarding expense-to-profit ratio could lead to financial collapse.

Work with the Right Real Estate Agent

Locating the best property with the least amount of renovations and the highest potential for equity growth isn’t easy. Things can become easier when the right real estate agent works for you to find a solid income property. Trying to locate the property on your own or without the assistance of the right real estate agent might not lead to the best outcome. And you benefit from an outcome that generates revenue to the maximum potential.