10 Mistakes To Avoid When Investing In Real Estate
to start investing in real estate? It can be a great way to build multiple
income streams, and help provide you with future financial peace of mind.
However, most people make some costly mistakes when they first start out.
Here are 10 common mistakes to avoid when looking to invest in real estate.
Not doing proper research
before starting/ not educating yourself in the world of investment properties. One of the biggest mistakes
you can do when entering the world of real estate investing is not knowing what
you’re doing. That could mean not knowing how to rent out and manage a
property, to what type of investment is best for you, to knowing what legal
requirements you have.
One example of this is that people often over
renovate for an area. They think the renovations will increase the value, but don't know the upper limit of how much a home will sell for in that area.
There is a lot to know when you’re looking to invest in real estate. It is a
wise first move to talk to experts, and learn what you can from people already
in the field.
Doing it alone/not having a
team behind you. The more
you learn about real estate investing, the more you’ll realize you can’t do it
alone. You need a team of people in your corner.
Not having proper insurance coverage, getting lousy financing, and underestimating the extent of
repairs needed to a home are all common mistakes that can be avoided if you
have the right team behind you.
Having a good realtor and coach is a good place to start. Working with someone
who is doing what you want to do is a great way to learn, and save yourself
many unnecessary headaches.
Not keeping on top of, or
cheeping out on advertising is another big mistake made by new investors. More often than not
you get what you pay for. Paying for good advertising can be the difference
between a solid tenant, and someone who ends up costing you money.
Not scheduling prospective
tenant appointments all at the same time. The more people that are looking at your house, the more desirable it
seems, driving people to act quickly. This can result in multiple offers,
allowing you to pick the best tenants for your space.
Poor or no due diligence
when selecting tenants. Just
because someone says they want to rent your property, doesn't automatically make
them good tenants. Make sure you’re running the proper reference and credit
checks to make sure you’re getting someone reliable.
Even when someone seems perfect, there will be tenants that need to go. Whether
they’re behind in rent, or breaking their tenant agreement in some other way,
some people just need to go. Being too
lenient with tenants and delaying the eviction process can cause you a lot
of money. You’ll need to learn when and how to deal with a situation quickly.
Handing over the keys to
the tenant before the first and last month’s rent actually clear the bank is another big mistake.
Better safe than sorry. This is one lesson you don’t want to learn the hard
way. If a tenant gets in and then doesn’t have the money to pay you, you’ll
have to go through a much longer eviction process. It will keep you from
filling your property with paying tenants.
Not taking before and after
photos from a tenant move in/move out. It is important to have proof of any damages caused by tenants
during their time in your investment property. This can shut down any disputes
over damages costs. Getting the tenants to sign off on the photos before moving
in is another smart way to keep people honest.
Not investing in cleanup
and/or updates when there is a tenant rollover. Take the time in between
tenants to get your property back up to snuff. It may just need a good clean,
but you may want to put some money into your property to be able to get more
out of it. Again, be careful not too over renovate, but it is important to at
least have your property looking clean, fresh, and inviting.
Focusing on quantity, not
quality. It can be
tempting to get as many investment properties as quickly as possible to get max
cash flow, but you don’t want to forgo quality for quantity. This is another
area where it useful to get advice from an expert in the field. It’s not good
to strap yourself financially to one property, but you’re going to see a
high turnover rate, and have more challenges with tenants in a rougher neighbourhood.
Thinking you’ll get rich fast, and not being in it for the long
haul. Investing in real estate
isn’t going to put major amounts of cash in your pocket right away. It takes
time, it takes work, and it takes money. That is another mistake, treating the investment as a passive, not
active, investment. You can’t just buy a property and wait for it to go up
in value. You need to be active in your investment. Whether it is making smart
improvements to the house, or getting good tenants, you will have to put work
in to get money out.
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