Any real estate investor will tell you that investing your money in property is a great way to build your wealth. However, as with any investment that you make in life, it’s important to do your research and take your time when choosing your properties. Real estate is a great investment, but that doesn’t mean that you can’t get financially burned in the process, even with the low interest and mortgage rates. Whether you’re looking to close your very first deal or are a real estate investing pro, everyone should avoid making these costly mistakes when investing in real estate to make the most out of their money.
1. Overpaying for a property.
If you’re turning to real estate investment as a means to generate wealth, the last thing that you want to do is overpay for your investment properties. If you’re unsure of the value of your property or feel that you may have been misquoted, look for a second opinion on costs and always be vigilant for mistakes in property analysis.
2. Not doing your homework.
Much like the great city of Rome, great real estate investors are not built in a day. The skill and acumen required to become a knowledgeable real estate investor takes time to learn, and it’s not the kind of learning you can just pick up as you go. Prior to making any financial decisions that could drastically impact your future, educate yourself on the process and ensure that you’re well-versed in what needs to happen on your end by reading books, checking out periodicals, and staying up-to-date with industry happenings.
3. Trying to do it all by yourself.
While owning and managing one rental property by yourself is probably doable, as you increase your number of investment properties, you’re likely to find yourself overwhelmed and unable to keep up. This is why it’s crucial to build relationships with all of the right people along your way; real estate agents and home inspectors are people you want to get to know at the beginning to help assist you with your purchase. Then, as you begin the renovation process, it will be crucial that you form relationships with people working in construction, maintenance, and remodeling companies as well as the plumbers, contractors, roofers, and painters that they provide you access to.
4. Being unrealistic about your cash flow.
Repeat after me: investing in real estate is not going to make you rich overnight. Yes, if you invest in a rental property, you’re going to have cash flow from rent, but there’s more that goes into it. If you own a rental property, you’re still responsible for making payments on it even when the property is vacant. You’re also responsible for all of the upkeep and maintenance work which can take a lot of your time, and if you hire a property manager to look after the property, you’re also going to be cutting into your cash flow. Plan ahead and be aware of exactly how much money you’ll need to put into your property before you net positive income.
5. Setting unrealistic money & personal goals.
One more time: investing in real estate is not going to make you millions of dollars overnight, and if you walk into investing with the mindset that it will, you’re going to find yourself in a world of financial trouble. If you want an investment that’s going to make you money without much effort on your part, you may want to consider another avenue. Investing in real estate requires a lot of work on the part of the individual as well as an adequate understanding of industry knowledge.