4 Mistakes to Avoid When Investing In Real Estate

Real estate investing has long been considered the “safe bet” for your money. While those still reeling from the housing crisis may hesitate to call anything “safe,” they …

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Real estate investing has long been considered the “safe bet” for your money. While those still reeling from the housing crisis may hesitate to call anything “safe,” they likely struggled during that time due to a number of mistakes on their part. With the recovery of the market, many more people are looking to find safe investment opportunities.

Getting into the real estate game can be a great way to produce long-term returns for your money, but should be avoided by anyone looking to “get rich quick.” The trick to success as a first-time property investor, is in establishing a number of rules for yourself and adhering to them. Included here are a few tricks to help you avoid a real estate investment downfall.

Failing to Plan

Jumping headlong into real estate investment because you found a house you love is a great way to wreck yourself financially. Your first step should be establishing a financial investment plan and then finding the home that fits your needs. Falling in love with a home because of its cosmetic appeal or price is a good way to sink yourself.

If you give yourself a set number for investment properties, you should never find yourself overreached or spread too thin. Investment properties should be looked at as an unemotional decision and based purely on the numbers. If a home fits your plan, you purchase it, but if not, feel free to walk away. Worried buyers who obsess over individual properties should instead make offers on several properties, so they have a fallback plan when other deals fall through.

Believing You’ll Get Rich Quick

Other than a few internet sensations, rarely does anyone find themselves “getting rich quick.” Wealth is something that can be acquired with long hours, hard work and wise financial choices. Real estate is no more a get rich quick scene than any other.

With countless people falling prey to self-help books offering wealth and power, there are many entering the real estate investment realm with no real knowledge. Studying up on the industry is key to getting ahead. Genuine real estate investment that will pay off involves hard work, intelligence and a good understanding of your personal risk-tolerance.

Going It Alone

One of the most dangerous choices you can make when trying to enter real estate investment is believing you, alone, have the skills and knowledge to flip homes singlehandedly. While it is possible you are intelligent and have talent, it is highly unlikely you will be an expert on everything from plumbing to legal negotiations.

Successful investors build themselves a safety net, or support group, of professional individuals. This net usually includes the talent of real estate agents, home inspectors, appraisers, lenders and closing attorneys. While you may not call on the expertise of all of these people, it is critical that you have respect for their knowledge and a good working relationship with each.

When it comes down to the knitty-gritty hard work of real estate investing, you will need a capable construction team. Investors will likely hire their own property managers to deal with all of the contractors, but you may want to establish a personal working relationship beforehand. Expertise needed includes: plumbers, painters, roofers, electricians, lawn maintenance, cleaning services and HVAC professionals.

Mismanaging Money

The fastest way to sink yourself in the real estate market is by poor management of your funds. Inaccurate rehab estimates and overpaying on initial sale can end up costing you exponentially and remove all of your benefit from the sale. You will need to budget for the possibility your home stays on the market longer or needs more work.

Your “risk-tolerance” comes into play when you are dealing with the equity of your home. How much money can you actually make off of the house and how much is it going to cost you? Is that investment worth your time? Taking risks does pay off sometimes, but you could also find yourself sitting on a home that is impossible to give away.  

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