Investing in real estate is a proven method to get rich, but only if you do it right. Too many investors plunge in before they are ready, and end up losing heaps of money instead. These are the mistakes they made.
1. Lack proper preparation
Not having a proper plan, not having sufficient finances, these are surprisingly common mistakes in newbie investors that lead to (often) disastrous outcomes. For a successful career in real estate, make sure you have done your homework. What amount of money are you hoping the gain, what kind of property would suit your current budget, how many properties are you aiming to buy? These are all questions that have to be carefully thought out before throwing your money into the pool.
2. Insufficient property research
Having a plan doesn’t guarantee success, however, it only gives you a leg up over other novices. If you do not properly research the area the property is located in, and the prospective developments and resulting appreciation (or lack of), you’ll end up losing a huge chunk of money on what is essentially worthless property. Do not ever buy property in an area which is selling like hotcakes just because other people are doing it. Do your homework and find out whether it really is worth it.
Warren Buffett always said that “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”, but hardly anyone seems to heed his advice. People usually jump in queues to buy low-priced property just because they think it is a bargain. Property prices plummet for a reason, do not even think of investing in a property if you don’t figure out why.
4. Lack fund management skills
Obviously, having sufficient finances to purchase a property isn’t always enough. All too often, investors fail to factor in rentals and utility bills that are charged to their account until a suitable buyer comes along. Even if they do manage to sell the property at a far higher price than they bought it, the net profit will be too little to be worth the effort in the first place. Also, with rental properties, be sure to check whether the rent charged to tenants commensurate with the costs incurred by the property.
5. Lack time
Be aware that real estate investment is not a quick steal, you cannot expect to make money in the span of a week. It is a long-term investment, as time is needed to: acquire the right property, wait for property to drop to a right price, spruce of property(not always required), and wait for the appropriate buyer to come along. Only consider investing in real estate if you have the time to spare.
6. No skills / manpower
If you’re planning to buy a cheap house that needs a lot of sprucing up before it can be sold at a reasonable price, you either have to possess repairing skills or access to cheap labour to make the profit worthwhile
7. No backup funds
Another mistake committed by novices is that they will often get all their funds tied up in property purchases and would therefore be unable to fund themselves should a crisis occur. It is always prudent to have a backup stash for emergency purposes.
8. Not inspecting property on site
There’s only so much you can glean from official papers, certain information -leaky ceilings, chipped walls- will deliberately be withheld or omitted. These will incur significant damage costs and will cause you to squander much of your hard-earned profit.
If you have insufficient funds and have to resort to borrowing from the bank just to make up the sum required to purchase a property, do be aware that banks have fluctuating interest rates, it will be good to lock in on a decent interest rate, so it saves you worrying about the amount you have to pay back.
10. Not having an experienced professional
Novices also often invest in real estate without proper advice. They do not realize that there are property issues, financial issues and legal issues associated with property, and thus they get tangled up with mundane affairs that may delay or even thwart the re-sale of property. It will be wise to partner with an experienced person that will be able to advice and to guide you in real-estate investment.
If you avoid these mistakes, you will be on your way towards becoming a successful real estate investor.