When done with knowledge and planning, investing in residential rental real estate can be a smart, lucrative source of income. But success is not guaranteed. A 2024 Clever Real Estate survey found that 90% of said they lost money, and 87% said they regretted investing in the first place.
Here are six mistakes you should avoid to ensure you don’t wind up . Earning passive income doesn't need to be difficult. Saving a few dollars by skipping background and credit checks and calling references can come back to cost you significant time, headache and money.
In extreme cases, it can cost tens or even hundreds of thousands of dollars, said Scott Friedson, a multi-state licensed insurance adjuster and CEO of , a large loss public adjusting firm. “I recently settled a claim where the policyholder failed to check references and skipped a background check to save a few dollars. It cost them over $200,000 in fire damage,” he said.
Rental properties are not “set it and forget it.” Unfortunately, too many novice rental property owners ignore this fact. “Small issues like a leaky faucet or a minor roof leak can escalate into major problems if left unattended,” said Adam Chahl, a longtime real estate agent and the founder of .
“In my experience, proactive maintenance can save you significant money in the long run. A small leak that costs $100 to fix today can turn into a $10,000 water damage repair if ignored.” He recommended budgeting 1%-2% of the property’s value annua.