| 8 Very Common Mistakes When Investing In Real Estate

Posted in Small Business at 9:00 AM by Loftis Consulting

When you want to place your money somewhere secure, it makes sense to invest it. Precious metals, the stock market, Bitcoin; these are all places you can put your money and watch it grow. For some, saving their cash makes sense, as it can stay protected and safe while you decide what to do with it. It can gain some interest, but generally savings do not have the capacity to make your money grow. The right investment – whether personal or commercial – can make your money earn more for you without you putting much effort into it. This is where real estate is a clever investment. When the market is in a good place and recovering, people invest in real estate to catch a good deal. The thing is, there are right and wrong ways to go about investing your money in real estate, and there is very careful planning involved. You can’t just rush headlong into an investment in a property. You need strategy and proper planning before you can put your money in, otherwise you can fall victim to the traps of investment. There are some common mistakes you can easily fall into when you are looking to invest in real estate, and we’ve got some of them for you here – as well as how to avoid them!

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Expect To Get Rich Quick

Many people believe that if they invest in real estate, they’re going to be rolling in cash quickly. It’s an easy mistake to make, because the belief that owning a house means you are a part of a wealthier dynamic is a common belief among people. It’s why many aim to own their own home. It’s a great long-term investment that may pay off in your old age, but if you’re hoping to benefit from tomorrow you need to look at something else. You need a good risk tolerance with investment in real estate, so getting rich quick doesn’t come into it.

 

Expecting To Go It Alone

When it comes to buying a property for investment, you need a crack team of professionals supporting you. It’s important to have an advisor, a lender, an attorney, an appraiser – the list seems to go on! It is a rather large business decision to invest in real estate, and as with any business, the team of people you have around you is going to make a difference. It’s not just about support, either, one mistake you make can be picked up by those around you before you see it.

 

Expecting To Manage Without A Plan

You cannot jump into a property purchase, that much is very clear. When you buy a house, you need to have a goal and know it. For example, you wouldn’t buy the house first and THEN decide whether it’ll be a rental property long term or a holiday home. That decision has to be made before you purchase, and it can influence the very house you put your money into. It’s not a transaction, it’s an investment strategy and having a successful investment will mean sticking to your budget!

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Expecting To Go In Blind

You may never have invested in a property before, but naivety cannot excuse you. If you want to buy a home as an investment, you need to do your research and educate yourself first. Investment means putting financial security of yourself and your family on the line and this isn’t a risk you should take unless you are fully aware of those risks and how they can affect your life.

 

Expecting To Get Away With Paying More!

If you buy a property that has been overvalued, your investment isn’t going to be a solid one. Doing the right research is important and analyzing the market – while it may not be a strength for you – should be done by a professional. If you buy a property that is seriously above budget, then you may as well not have a budget! If you are confusing asking price with market value, you will get a nasty surprise later on when you don’t make any money.

 

Expecting To Skip Due Diligence

A property deal can move quickly, quicker than you expect it to. But you should never sign a contract or any other piece of paper without ensuring you’ve checked and rechecked everything twice. The costs, market conditions and the property condition need the appropriate research. If you skip this step, you will end up with a property you cannot resell, which makes the whole idea of an investment null and void!

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Expecting Not To Pay Out

Being a landlord is expensive, there’s no doubt there. You have to ensure you have a good cash flow to cover repairs, insurance, missed rent payments and other miscellaneous expenses. If you plan to have a company manage the property for you, that’s another expense you need to consider. You also need to remember that buying a property doesn’t mean you’ll be able to let it out straight away. It has the potential to sit empty for a while, which means you’re going to need to cover the mortgage in the meantime, along with insurance and other taxes. This is, again, another reason planning is so crucial!

Not Having An Exit Strategy

If you’ve never heard of requiring an exit strategy, you haven’t yet done enough research. What do you do if the property you invest in doesn’t get rented out? What if you couldn’t sell it on? What if there is a stall in the rental market? You need to have an exit strategy in place, just in case any of these things don’t happen. Most people who lost their investment in real estate property didn’t have the right plan B, C or D to help them out.

When you intend to invest in real estate, you need to know everything – even the bad bits! Mistakes are easily made, and you want to avoid those as much as possible. Be informed, educated and ready for anything and your investment could be a great one!

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