10 Deadly Errors Real Estate Investors Make
As the real estate market continues to grow and improve, the idea of investing appeals to more people. For some, it becomes a career goal while others just look at it as side income. Regardless of your own goals, there is a correct way to do things. Here is a list of common errors new investors (and some seasoned) investors make.
- No Plan
The appeal of real estate investing lures people in, so they buy a house that looks like a good deal. It isn’t until after they take ownership when they try to figure out what to do with it. Experts say this is backwards from the way they should be doing things. Come up with a plan first and then find the house to fit.
- Unrealistic Expectations
Real estate isn’t a “get rich quick” scheme. You must think of it as a long-term investment. You have to be willing to work hard, learn and have a tolerance for risk.
- Going It Alone
You can’t be successful by trying to do everything on your own. You must find the right people and build a strong team. At minimum, you must find a real estate agent, a home inspector, an appraiser and a closing attorney as well as a good lender. If you get involved with remodeling, you’ll also need an electrician, plumber, painter, roofer, HVAC person, flooring installer, and contractor. You should find a cleaning company and landscaping business as well as a general maintenance person. You can’t do all of the work for yourself.
If you want to make money, you have to learn to spot a good deal. You don’t want to pay too much for a property or you lose out on a profit.
- Not Doing Enough Research
You should know what you’re getting into before you get started. Learn about foreclosures or dealing with tenants before you get started. Talk to other real estate investors in your community and ask questions. Figure out if this is the right career for you.
- Skipping Due Diligence
Don’t let the thrill of a good deal make you skip out on due diligence. While many investments call for you to move quickly, you should still do your research into every property you consider buying. Look at the property itself, the surrounding area, local market conditions and the costs involved.
- Inaccurately Calculating Cash Flow
You need to know how much money you have to buy properties and how much will come in as you rent out your properties. They fail to consider how long it takes to rent a property in the area on average, which means they will have to pay the mortgage and other costs out-of-pocket. Everything must be budgeted for before you jump in on a deal.
- Handling One Piece at a Time
If you are only dealing with one property at a time, you’re not running a business. You should have several projects in the works all the time at various stages.
- No Exit Strategy
Many investors only think of one way out of a problem property. They may figure on selling it if it doesn’t work or rent it out. What if the plan fails? It’s better to have multiple plans to get out of a property that doesn’t work for you.
- Incorrect Calculations
One of the big mistakes investors make is by having calculations on time and money that are too low for the project. Double the time and cost you expect it to take, and then determine if it’s a good deal.