Real estate investing is an excellent way to build wealth. With low interest rates, the Internet, and YouTube videos, it has become more popular than ever. But these things have also led people into making huge mistakes. Armand Candea, with Candea Development knows that without a plan, it is easy to slip up and make a mistake that can affect everything. So, before you decide to invest in real estate, it is wise to understand the pitfalls. Here are the most common mistakes real estate investors make and how to avoid them.
First mistake is not having a strategy.You are excited to dive right in an buy your first property, but without an investment plan it could lead you anywhere. Avoid this mistake by making a business plan before investing in real estate.
Second mistake is neglecting to do research. In a hurry and eager to begin, that is great, however not doing research can be a costly mistake. Avoid this mistake by doing your due diligence. Do your research to know if the property you are wanting to invest in is actually a good investment. Getting a home inspection is an example of doing your research to see if the home has mold, leaky roof, legal issues to name a few.
Third mistake is choosing the wrong financing. Some loans make it easy but with high interest rates, short terms, or penalties, avoid this mistake by understanding your loan terms. The best financing is a conventional, fixed-rate mortgage (or paying cash).
Mistake four is underestimating costs. Armand Candea explains a big part of real estate investing is estimating income and expenses. However, any miscalculations can make or break any deal. Underestimating costs reduces profit. Avoid this mistake by figuring all your expenses. A basic list of these expenses looks like this:
- Mortgage payment
- HOA fees
- Property management
- Realtor commissions
- Rental income
- Renovations and repairs
- Closing costs
- Market value and after repair value (ARV)
Mistake number five is working alone. Armanda Candea says working alone is time consuming and can lead to expensive mistakes. Avoid this mistake by working with real estate professionals that will help you achieve your goals.
Mistake number six is expecting fast and easy results. Do not dive right in and invest just because you see someone else build significant t wealth through investing. Avoid this mistake by looking at the big picture and investing for long-term. Focusing on long-term will make your expectations more realistic. Choose deals that make sense for your business and focus on long-term equity.
Mistake number seven is waiting too long to invest. Some new investors wait for the perfect new property to invest in, but this is not necessarily realistic. Avoid this mistake by lowering your expectations.
Mistake number is eight failing to screen tenants. Do not think that just because you have a rental property that you can escape vacant and tenant problems. Avoid this mistake by establishing a written rental agreement. Screen and check for references to keep issues at bay.
Mistake number nine is not having a saving buffer. Most investors make all the repairs right away when they buy a property, but what they fail to know is that problems might pop up. Avoid this mistake by saving an emergency cash buffer to cover unexpected expenses and damages.
Mistake number ten is no exit strategy. New investors do not plan for things to fall apart, things do not always go as planned. Avoid this mistake by planning your exit strategy. If things do not go as planned when you invest in a property, have more than one alternative in place.
Real estate investing is not always easy, it is not a get rich quick strategy. Now that you know the most common mistakes in investing in real estate, you will be better prepared to not make these mistakes. Take the right steps to make the best investment decision that is right for you.