The real estate business can be a very lucrative option for your investing your money. However, it does take hard work and smart decision-making to do it successfully. It requires you to thoroughly know and research the market so that you know how to buy a property at the right price. For new real estate investors, this can be a challenge.
Many real estate investors try to sell a house and use that money to purchase a new one. Regardless of how you plan to fund your purchases, real estate investing can be done successfully in many different ways. It helps to choose a strategy that will match your business strengths.
From there, many people will partner up with other investors that have strengths they don’t possess themselves. As prepared as you can be, new real estate investors still commonly run into pitfalls, obstacles, and hurdles throughout their journey. To help you avoid those in the future, here are four mistakes that new real estate investors make too often.
1. Investing Blindly
Real estate is more than just buying or selling property. Don’t get caught in a trend and buy a house because the market is currently booming. Your first step into investing should be planned instead of a rushed decision. Plans and strategies set you up on the right foundation. Many factors can influence how you determine your real estate strategy. These include:
- Where is the property located?
- What is the property’s value?
- Are your short-term investing goals reasonable?
- How about your long-term investing goals?
- What is the potential Return on Investment (ROI)?
2. New Real Estate Investors Don’t Do Their Due Diligence
The plan provides you a stepping stone to searching and finding your investment property. Ensure you are thorough in understanding your investment. Don’t limit yourself to a particular type of investment either. Instead, study the different options, and align them with your investment objective.
Research helps you avoid mistakes, such as underestimating your expenses or overpaying on a property. Another slight misfortune invoked by less research is overspending on renovations. Renovations should be practical and as cost-effective as possible, especially for new real estate investors.
3. Neglecting Tenants
The foundation of a good relationship with your market is your tenants. Although it’s better to leave the daily activities to an agent or property manager, you should always communicate with the tenants. The personal appeal stretches to accommodating the neighborhood or local community.
By creating a solid foundation of a relationship between you and your tenants, you help avoid issues later. What if your tenant does not speak up about a major roof leak in the living room? Create an environment where tenants can let you, or a property manager, know instantly about issues with the property. Additionally, if a tenant had a good relationship with you, they are more likely to take better care of the property. This typically lessens damages that occur throughout their tenancy because of their price in the property, and relationship with you.
Their needs help you decide what investments you’ll make that will do well for your profits. The local market system and numbers are also important in the final decision. For example, if your local area is a university hub, securing affordable student houses is better.
4. Trying to do Everything Yourself
Some investors might think they know it all. This is typically at a detriment to their overall business performance. There are only 24 hours in the day. Investing alone, without guidelines or assistance, can slow things down tremendously once obstacles arise. Most successful real estate adventures featured stellar teamwork. Even if you don’t have a formal partner, getting a mentor can do you wonders. Try to find someone who has reached the goals that you have for yourself because they have been in your shoes, and can provide a roadmap for you to get there too. Consider adding these teammates to your real estate investing crew:
- Real estate agents
- Mortgage brokers
- Interior decorator
- Property inspector
These common mistakes made by beginners in the real estate market are solvable through proper research and preparation. Get the relevant knowledge that you need, and make your money work for you. Consider teaming with others when it makes sense to do so.