5 Common Real Estate Investing Mistakes
In many ways, now is a great time to invest in real estate, especially if you have the patience to hold out for the inevitable market rebound. This could mean putting your money into rental properties so that you can earn a passive income even as you wait for property values to increase, or it could entail joining a real estate investment trust (REIT) of some kind. But either way, real estate represents a valuable asset that can make your money work for you, now and in the long-term. However, there are some pitfalls that you’ll want to avoid when you choose to put your investment funds into the real estate market. Here are just a few common mistakes that you could encounter.
- Get-rich-quick strategies. In this real estate market there’s just no such thing as opportunities to get rich on the fly. Several years ago, flipping houses was a valid way to earn a better-than-decent living. These days, not so much. There are still plenty of people out there offering to show you massive returns in no time flat, but your best bet is to take these promises with a grain of salt. If you want to earn money investing in real estate you need to exercise a little common sense, first and foremost. It was people looking to get rich quick that got us into this economic mess in the first place.
- Lack of backup plans. When most people start out with real estate investing, they have a plan in mind. They may purchase properties with an eye towards renovating in order to raise the value for resale. Or they might be more interested in the passive income that comes from rental units. The only problem with such a single-minded strategy is that if it doesn’t work out you have nowhere to turn. For this reason you must have a plan B (or C, or D) to ensure that your investment doesn’t go south at the slightest hiccup.
- Going it alone. Unless you happen to be an expert in real estate investing you might want to think about getting some help. You could hire an agent or broker to help you out, frequent forums for advice, or even read books and blogs as a way to learn the ins and out of the process. But don’t reinvent the wheel when there are so many resources out there to help you.
- Neglecting research. You wouldn’t consider investing in medical center homes for salewithout knowing what they are or how they can make you money. And just because you happen to own a private home doesn’t mean you can invest in other residences without doing your homework. It is imperative that you know your way around whatever type of real estate investment you’re interested in since a lack of knowledge and insight into the market could end with you losing your shirt.
- Overpaying. Whether you’re looking to invest in Los Angeles, Reno, or Katy homes for sale, it’s important to do your research in order to ensure that you make investments that are likely to show a return on investment. This not only requires you to compare your intended investment to other properties in the area, not to mention surveying the neighborhood itself for investment potential, but you also have to make sure that you don’t put more money into it than it’s actually worth. It’s easy to get wrapped up in a gorgeous property and a stellar sales pitch, but keep in mind that a return on investment will only materialize if the value of the property is more than what you paid.