Scary Stories: Real Estate Investment Nightmares
harkins / October 24, 2018
We’ve all seen those real estate reality television shows where investors find the best deals and walk away with valuable properties. These success stories make real estate investing look more straightforward than it is and while many have received enticing returns from their investments, there are others who have lost a lot of money. There’s no such thing as the real estate market being a “get rich quick” form of business. With that being said, we’re going to look at some scary stories about real estate investment nightmares.
You’ve decided to invest in rental property, and tenants move in. They have bed bugs and, after successfully removing them, the tenants in your other unit aren’t happy and move out. You pay for alternative housing for the other tenant while the bed bug extermination was occurring and could recover some of the costs from your insurance company. The tenant decides that they don’t want to return to the unit because they’re afraid the bed bugs will return. So, now you have two empty units. State law requires that you disclose that bed bug extermination occurred previously to each new applicant, so you’re finding that applications are being withdrawn each time you reveal this information. You’re losing money from tenant relocation, extermination, and two vacant units.
It’s difficult to avoid this nightmare because issues like bedbugs are, under some circumstances, unavoidable. You’ll find this is especially true when you’re working with long-term renters that may be bringing in pests without their knowledge. Screening applicants before renting to them will help to some degree, but will not solve the problem entirely.
House Flipping Nightmare
Everyone seems to want to get into the house flipping game, but it’s a risky investment. While high-rollers are making a fortune off of these investments, everyday investors have lost money because there’s a lot of room for error. For example, you purchase a home you know needs renovations you can address. You believe you can meet the budget and sell for a profit. As soon as you begin working on the project, you find dry rot in the support beams in the basement that was concealed by drywall.
You can’t leave this, and it’s not part of the budget, so the entire project is stalled until you find a contractor who can handle this task. Your budget, as well as your schedule, is thrown off and you have to sell the house for a higher price. If you don’t, you’ll have to reduce your profit or cut out some of the features you intended to use as selling points like granite countertops or stone flooring.
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