3 Major Risks Of Renting Properties And How To Mitigate The Risks

So you have decided to invest in properties and are planning to rent it out. You have the capital, the knowledge, and a good sense of where you want to invest now. However, you must also prepare yourself mentally for the major risks that awaits you when the rental starts. Here are 3 major risks of renting properties I consider quite substantial during your journey ahead.

1. Tenant do not pay their rent

This is basically the major concerns of most landlords. Landlords screen out the right tenants – or so they thought, and maybe they get good rental payments on time for few months but things changed after a while. You don’t get back your rental income because the tenants keep on delaying their payments. Worse comes to worse, you don’t hear much from your tenants and their bills dued more than 2 months – you checked your house and found out your tenant is already gone. They stayed at your house for free which is being very irresponsible especially at your expense.

2. The house is damaged/ things stolen

Alright so maybe the tenant has left the house for good without making payments and you think – “well, that’s alright! I can always get me new tenants”. But things just got worse when you discovered that your TV is stolen! Or nothing else was left there unlike when you started the rental except for the built-in items which is really not moveable. These kinds of problems are landlords’ worst nightmares.

It happened to me once. We had a condo near KL and welcomed a new tenant. The tenants claimed that she’s married and will be living there with her husband and children. We screened through their background details and found no problems at all. The payments were going smooth sailing the first few months until we did not received it for a month and contacting her seems unreachable. We decided to go visit the condo and shockingly found that our tv and some of our furnitures went poof!! And the house was like a wrecked ship – not to mention the weird smell being left there. Since then we always opted for good property management companies and have seen better results in terms of home maintenance qualities due to good tenant filters. However, some property management companies are only in for the money ignoring their service quality, hence we always opt for well known companies. It is a bit pricey in their services but help reduce lots of unecessary stresses.

3. Rental income does not cover your monthly housing installments

Whenever you are renting out on properties, the best strategy would be to get rental incomes higher than the installments. This is how you make money out of your investments. This is also a reason why you need to consider your housing investments carefully, that is to buy a property that is not too expensive so that people on majority will be able to pay you rentals that they find affordable and in a way helps you generate extra income out of the rentals. One of my property coach who is also my father once advised me, “when you are investing in rental property – go for the people in majority”.

This simply means that you buy property which can cater to the affordability of most people around that area or country. If you think that area is of high income earners then you may consider buying a quality apartment/condominium because people around there have the financial means.

However, if you find that the people living in that area consists of middle to low income earners then you might as well consider the lower range properties which caters to the affordability of the surrounding society. This way, if you are not earning positive cash flows from the property – at least you can get half of the installments covered, even though that would be our last resort. That’s a way you can minimize your risks to this matter.

So how are you going to minimize your risks during rental period?

1. Hire a property management company to manage your property

2. Research your property in depth before you make the investment in order to get the most out of your returns

3. Get your property insured for rental business purposes (there is an insurance specially designed to protect your property provided by the banks)

All and all, provided with great insurance coverage and the right knowledge – any property investments will be a good investment and a worthy one for sure.

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‘Should I Buy Property For Investment First Or Should I First Buy To Stay?

Before I started to get serious with property investments, I always have my mind set to buy a house but am always confused – should I stay right away? Or should I rent it out first? Then I think, “maybe..just maybe I can find a house that can do both! One that can be easily rent out and I can always choose to stay there when I’m ready – or so I thought”.

Turned out it wasn’t so easy to decide because if I choose to rent first, I might have to buy a smaller property first which is not in my interest. I don’t have much time to accumulate enough money to buy a landed house at that time – a landed house in a good location that can  be rent out while I hold no serious commitments and when I’m ready then I can just decide to move in.

On another hand, if I decide to buy my first house to stay then I might have to wait longer time to gain enough money to buy one decent house. Might take me another year.. Might take another 2 years – anything can happen within those years. I have this landed house that I marked my eyes on for quite a long time. It was in a neighbourhood I once grew up – it’s a peaceful place and located strategically in the centre of the small town I live in. But I know that by the time I accumulated enough money, the value of the houses there would jump higher than now.

The probability of not being to buy that house would be quite high and I might missed out better opportunities not buying cheaper properties for rent now. Why? Because the other property I had my eyes at that same time was another awesome apartment, quite small about 650 square feet, but in a prime area of Kota Damansara – a great place with many property boosters like hospitals, universities, malls and strong rental power.

It was quite a dilemma to decide which was the better options. So I studied how many property gurus who started from nothing and now end up making millions. I discovered that most of them started out by renting their homes – it was their first step to a financially free life. One of them was my coach who started from a small business helping his mother selling foods in a school canteen. He bought his first house before turning 25 and rented the house for 3 years before buying another one. All the hard work paid off as he became a property millionaire when he was already 30 years old by diversifying his rental incomes into various businesses and keep buying more properties along the way – pretty smart eyy!

All in all, it is actually up to you to decide whether you want rent first or stay first, why? Because everybody is different – if you have extra money, why not buy two houses (one for rent and one for staying), if you have limited funds then maybe you can consider renting it out first, or.. if you think you want to start a family then it may be better to buy for stay. There’s no right or wrong to this question because it is all up to your own preferences. The type of property that is the best for me may not be the best property for you.

The key takeaway I learnt is to use whatever you have..whatever was given to you – be it skills, money, assets, or anything you have and try to use them to provide value in the market. I listened to a talk by Jim Rohn – an exceptional motivational speaker, he advised that the fastest way to make huge money is to provide value to the market. I think that’s a good way to tune our minds to do good in life. When we provide value to the markets, we are practically solving societal problems. I hope this article helps you to have an idea of what you should do if you are ever in this situation because I did! Despite all the decisions you have to make, I know you’ll make the right choices – best of luck!

Should I Buy Property For Investment First Or Should I First Buy To Stay?

Before I started to get serious with property investments, I always have my mind set to buy a house but am always confused – should I stay right away? Or should I rent it out first? Then I think, “maybe..just maybe I can find a house that can do both! One that can be easily rent out and I can always choose to stay there when I’m ready – or so I thought”.

Turned out it wasn’t so easy to decide because if I choose to rent first, I might have to buy a smaller property first which is not in my interest. I don’t have much time to accumulate enough money to buy a landed house at that time – a landed house in a good location that can  be rent out while I hold no serious commitments and when I’m ready then I can just decide to move in.

On another hand, if I decide to buy my first house to stay then I might have to wait longer time to gain enough money to buy one decent house. Might take me another year.. Might take another 2 years – anything can happen within those years. I have this landed house that I marked my eyes on for quite a long time. It was in a neighbourhood I once grew up – it’s a peaceful place and located strategically in the centre of the small town I live in. But I know that by the time I accumulated enough money, the value of the houses there would jump higher than now.

The probability of not being to buy that house would be quite high and I might missed out better opportunities not buying cheaper properties for rent now. Why? Because the other property I had my eyes at that same time was another awesome apartment, quite small about 650 square feet, but in a prime area of Kota Damansara – a great place with many property boosters like hospitals, universities, malls and strong rental power.

It was quite a dilemma to decide which was the better options. So I studied how many property gurus who started from nothing and now end up making millions. I discovered that most of them started out by renting their homes – it was their first step to a financially free life. One of them was my coach who started from a small business helping his mother selling foods in a school canteen. He bought his first house before turning 25 and rented the house for 3 years before buying another one. All the hard work paid off as he became a property millionaire when he was already 30 years old by diversifying his rental incomes into various businesses and keep buying more properties along the way – pretty smart eyy!

All in all, it is actually up to you to decide whether you want rent first or stay first, why? Because everybody is different – if you have extra money, why not buy two houses (one for rent and one for staying), if you have limited funds then maybe you can consider renting it out first, or.. if you think you want to start a family then it may be better to buy for stay. There’s no right or wrong to this question because it is all up to your own preferences. The type of property that is the best for me may not be the best property for you.

The key takeaway I learnt is to use whatever you have..whatever was given to you – be it skills, money, assets, or anything you have and try to use them to provide value in the market. I listened to a talk by Jim Rohn – an exceptional motivational speaker, he advised that the fastest way to make huge money is to provide value to the market. I think that’s a good way to tune our minds to do good in life. When we provide value to the markets, we are practically solving societal problems. I hope this article helps you to have an idea of what you should do if you are ever in this situation because I did! Despite all the decisions you have to make, I know you’ll make the right choices – best of luck!