Investing in Real Estate is very rewarding but it’s not as easy as it seems or as easy as people tell us. It’s nerve-racking especially if you are a beginner and it is easy to make mistakes.
Just like any other money-making process or investment, there are challenges here and there. There are mistakes that if made could cost you money and time.
Every investment has its own requirements and a ‘way of being done’ if at all you want to succeed in it or make the process more fruitful.
Mistakes are easily made and at the same easily avoided if you do your homework well before you get into any type of investment. Don’t just get into an investment with a blind eye or ignorance. Do some work to know how the market or the sector works, mistakes made by investors before you and lessons learnt.
You are not the first person to invest in real estate, meaning you are not the first one to make these mistakes. Therefore, get to know how things are done – the buying and selling process of a real estate property.
Whether you want to buy land, a house on re-sale or you want to build a home from the ground up, etc. Understand that in real estate, you can easily lose money simply by being reckless. By not planning, not consulting/ involving the right people, not asking necessary questions, and not understand the process.
These common mistakes that most new real estate investors tend to easily make can cost you money and time. Therefore, look out for them and avoid them like a plague.
Not Planning Wisely.
Buying a property is not something you just wake up and throw your money into it without a plan.
Don’t let your real estate investing be a ‘by the way’ or happen by accident just because you have the money. .
You need a carefully and intentionally thought out investment plan/strategy. As you plan to buy or sell a property, think through all the important aspects of investing in that property.
Don’t just jump into a deal because it is a hot sale.
Have an investment strategy then get a property that fits your investment strategy. Don’t buy a property first and then later think of what you want to do with it. Do the vice versa, plan first before buying.
Not learning enough about Real Estate Investing.
Real estate investing is nerve wrecking and very complicated.
You need an adequate level of knowledge and understanding before you get into it.
As I mentioned above, real estate is not something you just jump into and let the bus take you wherever it pleases.
You need to do your research about the real estate market/ industry. Know the strict laws and rules that regulate the real estate industry, the terms used, and the market trends.
Don’t make an uninformed decision or invest your money before you understand some of these especially the laws and regulations.
You will take some time to master real estate investment but you have to keep reading and studying all that you need to.
Not Understanding your Local Real Estate Market.
Real estate markets are different in different economies, countries, and regions. And as they say, ‘all real-estate is local’.
Therefore, as a new real estate investor, you need to know how your local real estate market operates before you get into it.
How is the real estate market in your country and in your town? And is it wise to invest at this time or you can wait until the market is stable.
Get to know the property values in your local real estate market. Find out the land values, home values, home absorption rates, inventory values, etc. Know what the average time of a property –land, house – in the market is before it sells.
Not understanding the Cash Flow aspect of real estate.
Cash flow is the main drive in any real estate investment.
You need money to buy the property and to keep the property running especially if it is a commercial or residential property. That being said, you have to make sure your finances are right to acquire and maintain the property before it starts giving you returns.
In acquiring property, make sure you have enough capital to take care of the overall cost of acquiring the property. Also, make sure you can take care of other miscellaneous costs such as closing costs and real estate commissions.
If you are investing in commercial property, it might take time to get returns yet at the same time, you need to keep up paying the mortgage. Rentals might take some time vacant and you need to find a way to take of your mortgage, insurance, and other maintenance costs.
Learn how to plan your rental income to take care of maintenance, repairs, and emergency issues for your property.
As a new real estate investor, take cash flow into consideration while acquiring the property and maintaining the property.
Paying too much for a property.
This is one of the reasons you need to do your research and understand your local real estate market – property values.
New real estate investors who do not do the due diligence tend to pay way too much to acquire property than those who do.
Know the value of similar properties in your area- what homes, houses, and land in your area cost. When you know what to expect in terms of price coming from a point of research, you will know when a property is being overpriced.
That means you have to take some time before buying a property to explore different properties and different values.
Buying in the wrong Area.
Location, location, location, can’t be stressed enough.
‘Where is the property located?’ is one question you have to ask yourself before you acquire a property on a listing especially if it is commercial.
Think of what your tenants/ residents will consider before deciding to let a house or an office in your property then decide whether to invest or not.
The area determines the absorption rate and the appreciation value of your property.
If you are investing in a residential property, think of the crime rates of the area, quality of institutions in the area – schools, hospitals, etc. Think of access to transportation means – roads, superhighways, airports, etc. How far or near is the shopping center or restaurants?
The above factors among others greatly affect and influence the stability of the real estate market of the area and the salability of the property.
Doing it alone or with the Wrong Real Estate Agent.
One fact about real estate is that you cannot do it on your own no matter how much you try to.
Therefore, if you have always been a one-man band throughout your other projects, it’s time to have people on board.
As I mentioned earlier, real estate investing is complicated and there is a lot to be put in place if you want to succeed.
You need to have people with experience in the buying, selling, and managing of real estate to help you through.
In short, you need real estate professionals to help you during negotiations and making the right purchases or deals.
Think of getting a real estate agent from a credited agency or one who has a certification and experience in real estate. Don’t get a real estate agent just because they are an agent, get one who has proven experience and record of success.
Get a lawyer to help you understand the terms of buying or selling the property at hand among other aspects of the deal. Have an insurance expert to help you get the right insurance policy for the property you are acquiring.
Involve people who have your strategy and long term vision in mind to avoid making some mistakes that could cost you a lot later.
People say mistakes are meant to be made and to learned from but this should not be the case especially if they can be avoided.
As a real estate investor, making these mistakes will cost you to lose money or purchase the wrong property. Additionally, you might even land yourself into legal issues too that you would have avoided if only you were more cautious.
That being said, real estate investing requires patience and cautiousness. To be a great real estate investor, you need experience and this experience comes from learning through the process.
Don’t make hasty and uninformed decisions while buying or selling a property. Instead, do the due diligence by doing your research, planning, and asking for help/ expert advice.