For buyers considering investing in real estate, the first step can be an exciting and intimidating one. While the payoff can be huge, there are also many pitfalls and misconceptions that can turn a real estate dream into a frustrating nightmare. By educating yourself and getting the right help, you can easily avoid some of the most common real estate investing mistakes.
Here are the 5 most common real estate investing mistakes you need to be aware of before you start building your real estate portfolio.
Assuming that Only Wealthy People Invest in Real Estate
Perhaps the biggest of all of the real estate investing mistakes you could make is not investing at all. Quite often, people are afraid to take the leap because they wrongly believe the myth that they need millions of dollars to get started in the real estate investment world.
The truth is that all it takes is one modest-but-smart investment to get the ball rolling. As that property starts to generate income, that money can be turned around and directed into additional real estate investments. How do you think the big players got their start?
Not Doing Your Homework
In a best-case scenario, the property you’re considering purchasing is in your home city or one that you’re extremely familiar with. You should also know the neighborhood where the property is located and be familiar with factors such as comparable property values, crime rate, schools in the area, and if it’s an attractive area for renters. Other questions to ask (and answer) are why the owners are selling, how long they’ve owned the home, and how much they originally paid for it.
Before making the move to invest, you should become an expert on the property, its situation, and its location. Only then can you truly be assured that you’re making a smart move.
Failing to Work Your Investment Like a Business
One of the most common real estate investing mistakes is letting your emotions get mired up in your investments. Keep in mind that when you’re investing in property, making money is the end goal. While you may fall in love with the idea of renovating the little cottage in a rough part of town, if it’s not in an area that’s good for rentals or where property values are on an upward track, you’re better off moving on. Rein in your emotions and make sure you have a clear plan to make money from your property, whether it’s immediate rental income or a long-term plan based on a guaranteed increase of property value.
Paying Too Much
Investors who have done their homework will often be able to avoid this real estate pitfall. Paying too much can set off a cascade of problems, from creating an insurmountable mountain of debt to generating mortgage payments that are too high to be covered by the amount of rent you can reasonably get for your property. Negotiate wisely and if you can’t get a price that’s right, don’t hesitate to walk away.
One of the Biggest Mistakes You Can Make? Going In Alone
Whether you’re researching potential investment properties in a new area or are thinking of dipping your toes into the rental waters and becoming a landlord, it’s a common error to think that you can save time and money by going in alone. In fact, it’s best to work with an experienced real estate investment firm. They’ll be able to guide you, set you straight on some of the common misconceptions in the real estate investment world, and even act as a property management company so you put your money to work for you, rather than taking on a full-time landlord job.
In fact, securing the help of a real estate firm is one of the best ways to avoid all of the most common real estate investing mistakes. From finding the right property to negotiating the perfect price, they’re experienced in navigating the investment world to create smooth sailing for their clients.