5 Common Mistakes that First Time Real Estate Investors Make
When it comes to investing in real estate, the internet is overflowing with information regarding trends, the market, how to ensure that your investment is profitable. However important that information might be, it cannot be considered complete without taking a look at some of the most common mistakes that people investing in real estate for the first time, commonly make.
1. Not Understanding the Local Real Estate Market
As with any investment, investing in real estate can be risky, this is even truer for investors who fail to do their research. If you are not aware of the real estate market that you are investing in you are setting yourself up for failure. It is important to know what kind of tenant or homeowner is attracted to the area that you are considering buying in, that you are aware of any major issues in the area such as crime, or lack of employment opportunities, as these are major factors that will deter potential tenants or buyers from being interested in your property, and, therefore, cause you time and money.
2. Not Understanding the Role of a Property Manager
Working with a property manager can be a great help, they provide the day-to-day management to your property, find you tenants, collect your rent, and work as a liaison between you and those living on your property. They do, however, come at a price. While there is a common misconception that working with a property manager will cost a real estate investor all of their profit, they will cost you some, and it will take some time to ensure that you hire the right property manager for the job. Whether as a first-time real estate investor you decide to work with a property manager is a personal decision, however, it is important that you understand fully what they can and what they cannot do for you, your situation, and your investment before deciding.
3. Not Being Financially Prepared
Real estate is one of the most expensive investments that you can make, and while it can be extremely profitable if you are not prepared to make that investment completely, (that includes any renovations that might be needed, regular upkeep, and property taxes) you are making a mistake. While obviously having the additional income from the investment property can help, it is a dangerous move to rely solely on that.
4. Becoming too Emotionally Invested
Real estate is a financial investment, which means that if you want it to be successful you have to focus on the bottom line. Becoming emotionally invested in a house, or in helping out a tenant, as noble as it can be, can be dangerous to that bottom line.
5. Rushing In
Everyone wants to see their investment become a success. It is natural to want to see your profits grow and to feel like it was worth the risk. That said, far too often first-time real estate investors rush and either skip over crucial steps in buying or financing a property or take the first tenant that contacts them – regardless of how much of a credit risk they might be. Successful investments need time to grow. By being patient and doing your homework on all fronts, you will be providing a solid foundation for your real estate investment to grow upon.