To be honest, being a rental property millionaire is not as carefree as many might think. While the idea of being a “lazy tiger” is appealing, before focusing solely on the comforts of the end goal, let's take a moment to reflect on the journey. What challenges do these individuals typically face? TerraBKK reveals 6 real issues that anyone entering the rental property industry, regardless of their experience level, will inevitably encounter. Read this as a case study before aspiring to be a rental property millionaire.

  No Tenants 

           The basic and painful issue is, even after selecting a prime location and project, why is there still no tenant? The problem lies in the number of units in the project and the ratio of buyers who rent out versus those who actually live there, as they are all your competitors. Suppose most rentals are priced between 10,000 to 12,000 baht per month. If demand isn't high enough and your unit isn't particularly outstanding, it will take time to achieve your desired rental income. The reality that rental property millionaires face is that competitors may resort to ”price cutting”, opting to lower their rent to 8,500 baht per month rather than leave their units vacant. If all units drop their prices, trouble is knocking on your door.

  Rent Doesn't Cover Mortgage 

           Don't get lost in theories that lead to daydreaming; all rental property millionaires have gone through this lesson. The principle of using other people's money to invest, such as taking out a bank loan, can be simplified: if you borrow 1 million baht with a monthly repayment of 7,000 baht, and invest in a condominium priced at 2 million baht, you should rent it out for at least 14,000 baht per month to cover your monthly payments. Consider how much income a tenant needs to afford such rent. The reality is that not every location will have demand that can meet your desired pricing. This includes common area fees and other expenses.

  Endless Service 

            It's the landlord's duty to take care of the property. If you're tired of constantly solving problems, consider leaving some issues unattended. However, this can lead to bigger problems later on. All of this is the reality that rental property millionaires must face, such as a leaking roof that, if ignored, can lead to wall damage. Additionally, some tenants may request to install fixtures or drill holes in the walls. If the rental agreement isn't clear, or if the tenant is unaware of the implications, they may think it's harmless. Ultimately, the property suffers damage, and the landlord is left to deal with it.

  Deteriorating Property 

           Tenants do not maintain rental properties as they would their own homes. Therefore, the level of care for the property will undoubtedly differ. The condition of the property will depend on the luck of the rental property millionaire. Even if a security deposit for damages is collected at the start of the lease, it doesn't always cover the costs of repairs.

  Tenants Abandoning 

          Pay close attention to your tenants. Signs often start with late rent payments. New landlords may try to be accommodating, thinking of it as a mutual understanding. The truth is that “kindness” can be a danger to the rental property millionaire themselves. Tenants may become accustomed to late payments, making it a norm. The situation can escalate to tenants disappearing without paying rent, leaving the landlord with unpaid bills such as water, electricity, phone, and internet. They can't simply refuse to pay; if utilities are cut off, the problem ultimately falls back on the landlord.

   Tenants Not Paying and Not Moving Out 

          The law in our country protects tenants, which is something that rental property millionaires should be aware of. Some landlords encounter tenants who challenge them to take legal action for eviction, leaving them at a loss. To avoid such situations, ensure that your rental agreements are detailed and cover potential loopholes. If it's too late for amendments, follow the proper procedures, such as sending warning letters, issuing contract termination documents, and even pursuing legal action if necessary. ---TerraBKK

 

Article by: TerraBKK Investment Tips
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