Real estate investing can be an incredibly fun and profitable financial venture. As difficult as getting a mortgage can be, it’s actually one of the easier undertakings to finance, with one of the most straightforward processes. The benefits also far outweigh the potential issues, making it a relatively low-risk investment opportunity too. That being said, property investment can be tricky, especially for beginners. Every investor goes through a learning period where missteps and mistakes are common. To help you avoid some of these errors, here are ten to watch out for.
- Assuming You’ll Get Rich
Although some people will swear to the opposite, real estate investing won’t make you rich overnight. In fact, it might not make you rich for quite some time. This is a long-term investment, but a good one nonetheless. However, there are many other long-term investments that require much less time, money, and work than property investing does. Because of this, financial gain simply isn’t a good motivator. To be successful, real estate must be a genuine passion of yours.
- Neglecting Learning The Basics
You wouldn’t try to fly a plane or perform brain surgery without years of training and education to fall back on. Just like any of these pursuits, investing has its risks, which is why you need to learn the basics before you put your financial security on the line. It’s at this point that many newbies invest thousands in books, courses, and tapes that they never use. Instead of wasting your money, you should read articles, listen to podcasts, and borrow books from the library.
- Planning As You Go
Investing in real estate isn’t as simple as buying a house and then selling it or renting it out. There’s a lot of work that needs to go into the process, especially if you hope to make some decent money from it. For this reason, you will need to spend some time planning before anything else. Only once you have a plan can you start looking at properties. Make sure that you pick an investment model and then find houses to match, rather than the other way around.
- Working On Your Own
Having the right team in place can make property investment a whole lot easier. After all, there’s only so much that you can do on your own. At the very least, you should have a real estate agent, home inspector, appraiser, lender, and a closing attorney by your side. If you plan to rent out properties, then property management should also be considered. Most investors also need contractors, electricians, and other professionals to handle any remodeling and maintenance.
- Falling For Pretty Houses
When purchasing a house for yourself, it’s practically impossible to ignore your emotions completely. A home is meant to be a sanctuary for a family, so it is crucial that you love the property you plan to live in. When it comes to investing, however, you need to use your head. Exquisite chandeliers and marble counters may be beautiful, but there are also expensive. You can’t allow yourself to fall in love with a home like this if it isn’t going to make you any money.
- Hurring Into A Purchase
Real estate is exciting and fast-paced, but that doesn’t mean that you should hurry into a purchase the moment you find a property that you like the look of. You need to slow down and study the market before you put an offer in. If you don’t, it could create problems that affect your entire life, as well as your investing dreams. Make sure that you spend time researching market conditions and look at hundreds of properties and deals before you actually buy one.
- Asking Family For Loans
Finding a great opportunity is tough when you don’t have the funds to invest. Rather than borrowing from banks and other lenders, many novice real estate investors turn to their friends and family to fill the funding gap. Unfortunately, this rarely ends well. After investing in your venture, your loved one might think that they have some say in it, which can put a strain on your relationship. If possible, it’s always better to fund the venture yourself or speak to a lender.
- Paying Way Too Much
There’s only so much that you can spend on a property before it turns into a loss. With that in mind, you must have a clear budget before you go into negotiations. Make sure that you consider and plan for all of the additional costs associated with the property, such as repairs and renovations. If your budget doesn’t line up with what the seller is asking for, then you need to walk away. This can be difficult, which is why it’s so crucial that you don’t get emotionally attached.
- Having No Backup Plan
When you buy a property, you need to have more than one exit strategy. Knowing whether you want to sell or rent out your new investment is important, but if your plan doesn’t pan out, then you could be stuck with a house that you don’t want or need. This is why you should have at least one other way to get out of every deal. If your original plan was to renovate the property and sell it, for example, then plan B might be to keep hold of the house and rent it out.
- Giving up Too Soon
Many newbie property investors fail to realize just how difficult a business this can be. While there are some great ways to achieve financial freedom, not one of them is going to come easy. Just like any other sort of business, there are many problems that you will have to face, some of which could cost you big. However, you’re not going to get anywhere if you give up at the first hurdle. The only way to be successful is to stick at it and keep trying until something works.
Everyone in real estate makes mistakes, but, for a smoother path to success, try to avoid those listed above.