Don’t Make These 5 Big Real Estate Mistakes
Risk is part of any investment strategy, from stocks and bonds to real estate. But when investors don’t take the time to properly understand their markets, make rash choices, or are led by bad advice, they amplify the risk exponentially. Avoiding mistakes is just as essential as making sound, strategic decisions! Of course, it’s easier (and less costly!) to learn from the mistakes of others, so without further ado, here are some big missteps of which to steer clear.
Mistake #1: Not Knowing Your Investment Style
This is the very first question you should ask yourself: what’s your investment personality? Do you want steady, stable cash flow? Or do you love the thrill of finding a rehab property, fixing it up, and flipping it? If you invest in properties that are not aligned with your style, regardless of the potential for profit, you will likely drain profitability – and you will certainly drain your energy.
Mistake #2: Not Doing Your Homework
Passive income is not the result of passive investing. At least not initially. You need to do your due diligence before making any decisions. Is this neighborhood on the verge of growth? Or is it in decline? What do comparable properties sell for? What are rents and lease rates in this area? Is there a wide and deep pool of potential tenants? What about jobs, businesses, and services? Where can I find a reliable real estate broker or turnkey company? Which house/building inspectors have a reputation for meticulous, detailed reports?
And on and on!
Take the time to find the answers to these questions – and learn what else you should be asking. Investors groups can help, as can USREEB’s expert team.
Mistake #3: Rushing
Fools rush in… We know that finding the perfect property is important. And we know how tempting it is to settle for less than ideal because you’re sick of the process. Or because you don’t think you’ll find a better deal. Or because you think no other property will be this good so you need to scoop it up.
There are a variety of factors that create a sense of urgency – and sometimes, you do need to strike while the iron is hot. But as you gain experience in real estate investing, you’ll begin to judge when to act and when to hold back. For example, should you sell as asset quickly – or should you hold out for your asking price? Should you pounce on a property or wait for a better deal? Rushing can result in profit loss – and untold levels of frustration.
Mistake #4: Investing Cash-Only
Living completely debt-free is a great goal – for consumers. Not having the burden of credit card debt, car payments, etc., is freeing. But when it comes to investment, it is often a smarter idea to save your cash and take advantage of favorable lending. You could spend all your cash on one property, for example, or a fraction of it on ten. If you choose mortgages or other funding options, you can leverage rents and leases to pay off those obligations – enabling you to save your cash for a rainy day.
Mistake #5: Taking on Property Management
You may have come across this gem of advice: “No one will ever care about your property more than you. Manage it yourself.” Two considerations to keep in mind: one, managing your own property(ies) is not scalable. If you want to grow, you must delegate to a trustworthy property manager.
And two, it’s not altogether accurate to say no one will care about your property as if it’s their own. Professional property managers take great pride in their work – and they often have the web of industry connections (from plumbers to GCs) to ensure maintenance and other issues are handled quickly and properly.
If you want to be a landlord, great! If you want to be an investor, find a partner to help with this vital function.
Perhaps the biggest real estate investment mistake is not learning from your real estate investment mistakes! They happen: if you can learn the lesson and apply it, you’ll be far better off. Better yet, if you can learn from other investors’ mistakes, you’ll be ahead of the game. To learn more on how not to make the 5 big real estate mistakes visit www.usreeb.com