The real estate market is now on the rebound, so investing money into it seems like a pretty appealing idea. It can be either for a side job or a career. There is always a good way and bad way to go about it, though. Here are ten different lethal mistakes that you can do as a real estate investor.
1. Plan As You Go
If you have a lack of a plan, it can be a critical mistake as an investor. Do not buy a house just thinking it is a good deal, you will not know what to do with it. You first need to have a plan, pick an investment model, and then find the property that matches that model.
2. Thinking You Will Get Rich Quick
Do not listen to “infomercial gurus.” Real estate is not quick, and it is not easy. It is a long-term investment, and you will need to work hard for it and be smart. Willingness to work is the key, and you need to understand the risk tolerance as well.
3. Being a Lone Ranger
To be successful in the real estate market, you need to build yourself a good team of professionals. You should have a good relationship with an appraiser, a real estate agent, a home inspector, a lender, and a closing attorney. You should also find qualified remodeling and maintenance specialists as well to join your team.
4. Pay Too Much
If you pay too much for a property, it can eat away at your profit. This mistake can surprise investors later when they find out that they did not make any money on their investment.
5. Skip Your Homework
There are wannabe real estate investors out there that will not even crack a book before they start investing in the real estate market. You should educate yourself before putting your financial security on the line. Read books, go to seminars, do everything you can to learn whatever you can before investing.
6. Avoiding Due Diligence
Investors move quickly on deals. Even though they move quickly, they still do their research before they sign a contract and write a check. If you buy a property that needs more work done than you anticipated, you can end up being in a hole for thousands of dollars. Make sure to do some research before investing in a property.
7. Miscalculating Cash Flow
If you are buying a property to hold and rent, you need to have some cash flow to cover maintenance. A property manager can take up to ten percent of the gross monthly rent, so if you equate that into the equation, you need to make sure that you are making money having all of your other maintenance expenses as well.
8. Having a Low Volume
When you have one deal at a time, it is doing a transaction, it is not running a business. Make sure you have many prospective deals so you can weed out the bad ones and make moves on all of the good ones.
9. Having No Way Out
Make sure that you have more than one exit strategy when you purchase a property. Do not get stuck with that property. What if the property will not sell or rent? Make sure you have more than one way to get out. Hopefully, you will still be able to turn a profit, but if not, at least you can get all of your money back.
10. You Miscalculate Estimates
After you do your research, you should double the amount of money and time that you think that it will take. That way you know the worst case scenario, and if the deal still sounds good with the worst case scenario, it is probably a good deal.