Real estate investment is a tough nut to crack and not everyone gets success in it. While some thrive in the industry and rise to the top, others struggle to survive. And the only difference between the successful and unsuccessful real estate investors is that the successful people know the industry and avoid the common mistakes while the others are unaware of the damage they can get with these mistakes and keep on repeating them.
There is a few real estate investing mistakes in particular that are commonly made by the inexperienced people make, which results in great losses. Whether you’re an experienced investor or new, avoid making these top 7 mistakes:
1. Not choosing the right investment type
As a beginner in the investment world, you may believe that there is only one type of investment option available in real estate i.e. real estate investment. But the fact is that the industry is quite wide than you might think. Know about the types of options available:
- Residential real estate investment
- Commercial real estate investment
- Industrial real estate investments
- Retail real estate investments
- Rental property investment
Before you make the final decision, it is important that you look for the best options available and make the final decision with the option that matches your own skills.
2. Not Understanding Real Estate Value
The second most common among the real estate investing mistakes that people make does not understand how to determine the real value of a home, beyond what the property is listed for. It is important for an investor to analyze neighborhood trends and other market elements. Believing that the price is fair, you might find it difficult to make any profits as negotiation is what makes you a great and successful real estate investor.
3. Getting Lousy Financing
There are a wide range of mortgage options available in the market and their purposes are to help home buyers to get into certain homes that they might not otherwise have been able to afford.
If you are planning to buy a home or land for personal use, then it can be considered a good decision to take lousy or big amount as a lot, but if you are investing in the property, then the amount you take as finance should be as low as might think. As an investor, make sure you are using your own savings if you want to save more on profits as most of your profit amount will be going into the interest charged by the lender.
4. Doing Everything on Your Own
As a human being, we are always after saving money and would want to do things on our own. And if you think that you know everything about the real estate market, you are also going to make the same mistake that others made already and failed. Make sure you take help of professionals to guide you through your decisions and make better deals for better profits in future.
This point is somewhat related to the research part. If you are not able to do research strongly, you can’t know about the current property rates and end up paying higher than the current property rates. Overbidding on a property can have a waterfall effect of problems. It may take years for the property buyer to recoup this investment.
6. Underestimating the Expenses
As a homeowner, you can attest to the fact there is a way more to owning a house than just making a mortgage payment. You have to bear many other expenses like maintenance, painting, and more. Then there are the costs associated with keeping all of the appliances running and furnishing the house, not to mention the cost of installing a new roof or other little things like insurance and property taxes. Determining these expenses is the best thing and can save you from the unwanted burden of expenses.
7. Playing Lone Ranger
One of the biggest real estate investing mistakes that most people make these days is that they plan to invest alone. The reasons are genuine; they want to get all the benefit when selling the property. But, they forget that the key to success is building the right team of professionals. Similarly, in real estate investment also you need good relationships with at least one real estate agent, an appraiser, a closing attorney and a lender.