If you’re just getting started in real estate investing, don’t expect to become an expert overnight. You can indeed make money buying and selling properties, but it takes knowledge, determination, and skill. It also helps to know some of the classic mistakes that others make when they start investing in property, to help you avoid making them as well. Here are some of the things you should avoid when starting out your real estate investments;
Not having an investment plan.
One of the worst mistakes someone can make in real estate investing is not having a solid investment plan. It doesn’t have to be overly detailed or complicated; just a simple plan would suffice. The plan must include the type of house you’re looking for, the use of the property, whether you intend to use it for residential or commercial purposes, whether you plan on leasing the property or selling it, and a proper exit strategy.
Not conducting a proper inspection of the property.
It’s easy to jump into the payment process right after you’ve seen and are content with the pictures of the property you intend to buy, but that might prove to be a grave mistake. The importance of property inspection cannot be put into emphasis enough. This might include visiting the property, inspecting every nook and cranny, and ensuring no stone is left unturned. This may be tedious but believe me; it is very essential. This is how a buyer gets to know the property’s actual condition, checks the property’s structural integrity, discovers any damages to the building, and evaluates whether it is worth buying the property. After the inspection, one can calculate the repair cost for the damages and negotiate the buying price of the property based on the condition of the property.
Overlooking on expenses or costs.
One of the main, if not the only reason people invest in real estate is to make a profit. For an investor to get profit from the investment, he/she should not ignore expenses. In addition to the property’s purchase price, the investor must also consider other costs incurred, such as property management costs, property taxes, insurance costs, repair costs, maintenance costs, etc.
Letting your emotions take over
Using your emotions instead of logic when buying a property can land you in big trouble. Falling in love with the property can make you overpay for it more than what it is worth just because of its looks. It would be best to make a rational decision based on your research and analysis rather than your emotions.
Not accounting for any vacancies.
Particularly in apartments, failing to account for any vacancies is a very common mistake that can be overseen by almost every rookie in real estate investment. Failing to account for investment can disrupt your cashflows and profitability since less rental income is being earned. Vacancy rates are the number of units in the property that are unoccupied. Vacancy rates are a crucial aspect to consider when investing in a property. An area with a low population and a high vacancy rate will lead to less income being generated. This will make it more challenging to cover the incurred expenses. This makes it more fundamental to research the area’s vacancy rate for the investor to make an informed investment decision.
Being short-sighted and not thinking long term
Real estate is a long-term investment. An investor should invest in a property in an area with growth potential, development plans, and an increase in demand since this guarantees an increase in the returns as time progresses. Only thinking about short-term goals will lead to an investor investing in a property with stagnant growth and demand.
Failing to do your research
This is a crucial mistake that investors might neglect, and failing to research the property before purchasing is a grave mistake. There have been many instances where a property was sold to a seller before proper research was conducted. The property was later found to be a ‘phantom property’ since the buyer bought a nonexistent property. The investor should conduct extensive research of the property, which may include verifying that the title deed provided by the seller is legitimate, the property is not entangled in any land disputes, and checking on the area’s zoning regulations to check for any land use restrictions. In the case of a large property, the investor should also check with NEMA to ensure that they licensed the property.
Not seeking professional help.
Investing in real estate is very complex, and seeking professional help is highly advisable. This makes it fundamental to seek professional help when in the process of buying property. This can include real estate agents, consultants, and property lawyers. They will guide you every step of the way, providing valuable insight to ensure you make a sound investment decision.
Avoiding these common mistakes will improve your real estate investing journey. Make a clear investment plan, do a thorough real estate inspection, weigh all expenses, be reasonable, consider vacancies, think long-term, prioritize the location, and, if necessary, seek expert help. Remember that real estate investing is a journey that requires careful consideration, patience, and a solid strategy to succeed.
