It also is true that there are real risks involved in owning rental real estate. This week I want to cover some of the major risks, and explore whether or not these threats can be managed.

The challenges to ownership of rental real estate can be divided primarily into two categories, which I will call tenants and repairs.

Tenants are a necessary evil in the world of rental real estate. Of course it would be great if someone would write you a check each month and never complain about problems with the property or problems in their lives, but that is not the real world.

If we are to have income in the form of rent each month, and if we need that income to pay for the investment, then we are going to have tenants.

The good news is that everybody has to live somewhere. Housing is not a luxury in our society, it’s a necessity, and our population is growing every day.

The Atlanta Regional Commission recently forecast that our population will grow dramatically over the next 25 years. They predict we will add almost one million new households to the ten county metro Atlanta area during that time. In addition, they estimate that more than half of the housing units needed to house those new residents have yet to be built.

Many of those new residents will be looking for clean, decent and affordable rental housing while they establish themselves financially and begin to save for a home of their own.

But if you are vacant right now, all the growth in the world won’t help you pay the mortgage. That’s why it is urgent to avoid long periods of vacancy.

One tried and true strategy for keeping your property occupied is to price it slightly below the rental rate the market will bear. And surprisingly, that rate goes up and down from time to time.

For example, when interest rates were at the bottom, and it seemed as if every tenant in America had moved out and bought a new house of their own, we had a glut of vacant rental homes in the Atlanta area. It was not unusual to see apartment communities offering 3 or 4 months free rent to new residents. But today with interest rates climbing and occupancy rising, there are fewer and fewer deals to be found. Rental rates are rising.

The solution is to stay in touch with the rental market and respond as necessary. If you cannot afford at least one vacant month per year, you probably don’t have the financial depth to own rental real estate.

Another reason I like detached single family homes more than apartments is that most people who live in apartments would rather live in a single family residence. One good source of new tenants is the nearest apartment complex. By offering more privacy and a fenced backyard to a renter, I can often find a new tenant willing to pay just a little more in rent.

The second area of challenge to rental ownership is repairs. And just as in controlling vacancy, the secret is to recognize your weaknesses and plan in advance for problems.

I have long advocated professional home inspections when buying any real estate. In my opinion, it takes an independent party to separate themselves from the emotion of buying any real estate. After a thorough inspection, you should have a good idea of which major systems of the house are near the end of their service lives, and which major repairs you had better start saving for today.

This is another reason I like little houses as opposed to apartment buildings. When I have a problem in a little house, it is usually easy to understand and easy to repair. If the water heater goes out, it will cost me $500 to get it replaced. But if the central heating system in an apartment building goes out, it may cost many thousands of dollars.

The solution is to know in advance which systems are near time of replacement, and set aside funds for those repairs. Prudent condominium associations have, for years, set aside funds on a monthly basis for planned major repairs. Thus, when the building roof finally needs to be replaced or the swimming pool needs to be repaired, the funds are already in escrow, and the owners avoid unexpected large expenses.

By keeping your rental rates in tune with the law of supply and demand, you should always be able to keep your rental property occupied and generating the income you need.

And by setting up an estimated maintenance and replacement schedule when you buy the property, you will likely be able to anticipate repairs and replacements without shock to your annual repair budget.