As you make the leap into real estate investment, avoid these five mistakes to sidestep money-pit projects.
- Buying Without A Plan
As the real estate market improves, beginner investors are quick to purchase a property without any real plan of what to do with it. They’ll find a home at what’s believed to be a good deal without a plan of how they’ll make it better or who will buy it. The better route to a successful investment purchase is to create the plan and then find a property that fits your needs. When you create the plan first, you’ll inherently develop an ideal property in your mind, wasting less time and money executing the deal.
- Looking For A Fast Pay Day
Television shows that feature home flips that net tens of thousands of dollars pack months’ worth of work into a 30-minute segment. For the newbie investor, the appearance of a get rich fast system is appealing. Beginner real estate investing isn’t a fast way to make money. It’s a profession that makes money over time. If you’re not ready to invest the time and man hours, grow your money in a different niche.
- Not Building A Team
From a reliable accountant to the plumber, you need to surround yourself with a skilled team that you trust. Before you jump into you first investment deal, take the time to construct a team of a real estate agent, an appraiser, a home inspector, a closing attorney and a lender. Research people and companies in your area. Ask for recommendations from colleagues and read online reviews. Build a real estate investing team so you have industry experts to turn to when you have questions.
- Skipping The Details
From beginner real estate investing to expert level, doing your due diligence to ensure the property is a good deal is essential. Study the purchasing trends of the area, mortgage rates, the cost of improvements, and have a title search performed. Skipping any of these details may lead to you spending your entire savings on a property you assumed would appreciate or sell quickly without having the data to back that prediction.
- Miscalculating Cash Flow
For real estate investors planning to acquire, improve, and rent out properties, it’s essential to correctly judge cash flow. Consider the probability that the property sits vacant on the market for a couple of months before you find the right tenant. Do you have the cash reserve to cover the mortgage and property expenses until rental income begins? You’ll also want cash on hand for home repairs or accident caused by the tenant that you’ll need to repair.