Real estate investing can be one of the most profitable forms of investing in the world. But real estate investing also involves huge risk when you are not familiar with the nuances and trends of the market. When you invest your hard-earned money it is best to stay clear of common mistakes usually overlooked. By knowing the common mistakes, one can stay clear of them and increase your return on investments. Someone once said: “Before you can know what to do, you must know what not to do.”
Bankrate.com summed up the top ten mistakes made by property investors by speaking to full-time, established property investors and other professionals. Listed below are those top 10 mistakes.
Not planning ahead – The biggest mistake made by beginner investors are inadequate planning. The best way is to structure a proper plan before buying rather than buying something and later figuring out a plan. Too many people just buy property because they think it’s a good deal. Instead, investors should make offers on many properties by really looking at the numbers. By doing this it will ensure that a good deal not only matches their investment strategy but work out with the numbers calculated
The quick money idea – Too many beginners think it is extremely easy to make money in property investing. Real estate investing should be looked at as a long term investment in the beginning. To get the deals that make money fast you at least need to know the basics.
Doing it without any help – So many people have done what you want to achieve. If you want to be a millionaire or replace your monthly income with passive income, someone did it and is sitting in exactly in that position. The nice thing of the world we live in is that those experts write books, hold seminars and are very willing to help (I know). Consulting with people who deal with real estate every day (like bankers, estate agents, home inspectors, etc.) is also not a bad idea.
Making excess payment – Paying too much for the property is another common mistake of novice real estate investors. Paying too much will result in your money being locked up in the property deal where you get no return.
Not doing the groundwork – By not doing the required groundwork, beginner investors have lost a lot of money. In any business, you need to do an adequate amount of homework to achieve success. By learning the fundamentals, you increase your chance of success.
Throwing caution to the winds – A certain degree of caution needs to be exercised when investing in real estate. New investors often buy a property without doing an adequate amount of research. A bad deal can look really good without research.
Inadequate calculations when it comes to money – A very popular strategy is to buy, hold and rent it out for a profit. If the costs are calculated wrong or if costs are left out, the positive income property can turn into a liability very quickly.
Lowering the volume – A larger volume of transactions helps increase the profits by lowering the impacts of marginal deals.
Getting trapped in your own deal – One way to be prepared for the fluctuations in the property market is to have more options at hand for the property you buy. The positive monthly cash flow can go negative with variations in the market. One way to cope with unexpected situations and reduce cost is to have alternative plans/strategies.
Incorrect estimates – It’s always a good idea to keep up to date with the current and estimated future values of your properties. This ensures that they don’t lose money in a deal.