Investing in real estate is one of the most reliable ways to realize a steady return on your investment dollars. But, investing in real estate is not fool proof.
A single mistake can turn a profitable real estate portfolio into a losing investment, and drastically slow your progress in building wealth. However, once you are aware of the most common pitfalls, and how to avoid them, you have a better chance of turning a profit year over year.
So here are 7 of the most common real estate investing mistakes, which are also discussed by Pat Curry in a BankRate.com article.
#1 Inadequate Research
Maybe you’ve spent a long time waiting to make a real estate investment. So as soon as you have the money to start investing, you jump right in and buy your first property. But if you approach real estate this way, without doing your research, you may have doomed yourself to failure, at least on your first deal.
Before you make a real estate investment, you need to be reasonably sure that you are investing in a healthy market. And, you need to be confident that the property you purchase will turn a profit, based on well-researched facts.
You can begin your research by digging into market data for the general location you are considering investing, and carefully examine real estate trends. From there, conduct additional research by consulting your local real estate team of experts, and analyze their research and conclusions.
#2 Flying Solo
While real estate investing is far from easy, you can teach yourself the basics. Anyone with access to a public library and the Internet can study real estate investing.
But the fact that you can learn real estate investing on your own doesn’t mean you should invest on your own, especially as a beginner.
To realize decent returns on your real estate investments, it’s prudent to rely on experts to purchase and mange your properties, along with lawyers and accountants.
#3 Failing to Plan
No matter how much cash you have on hand or how successful you’ve been in the past, real estate investing requires a strategic plan.
Impetuous investors often fail to plan. As a result, their real estate investments often flounder or outright fail.
Here are just a few things you should consider including in your real estate investment plan:
- Purchase price range and criteria.
- Investment budget for rehab.
- Long and short term financing strategies.
- The percentage increase in value expected after purchasing and rehabbing a property.
- The period of time you expect to hold a property, and the desired exit strategy.
- Method of maintenance and management of your investment portfolio and properties.
#4 Miscalculating Estimates
One of the biggest mistakes beginning real estate investors make is miscalculating estimates, resulting in either missing great investing opportunities or losing money on purchased properties.
Reasonable expectations and accurate estimates from the real estate professionals on your team are critical to properly estimating the costs of purchasing, and either flipping or putting a property on the rental market. Most importantly, though, is reasonably estimating overages for unknowns to make money even in the worst situations.
#5 Low Volume
Just like any other business, your profits as a real estate investor will be proportionate to your business volume.
If you just dabble in real estate, you can’t expect to make much money. But if you ferociously attack your business with an entrepreneurial spirit, while making good decisions, you should excel.
To invest in real estate and build long-term wealth, you need to have the volume (e.g., an increasing number of properties) to grow your business. And again, you will need to rely on local real estate experts whereby you can buy and manage the volume of properties required to build a successful wealth-building business.
There’s an old adage that you make your money when you buy, not when you sell. The meaning of this saying is that you have to buy an investment property at a low enough price to make a reasonable profit, or else you will lose money.
Falling in love with properties and overpaying is a rookie mistake that can be avoided with an unemotional approach to real estate investing that adheres to a proven strategic plan.
And again, it’s important to use your local real estate team to find real estate deals at a price you can make money.
#7 Expecting to Get Rich Quick
Real estate investing is not like high-frequency stock trading. Rather, investing in real estate is a longer-term proposition that can take months is make an initial profit.
One of the biggest mistakes a real estate investor can make is thinking he’ll get rich quick. Experienced real estate investors know they’ll get rich over a period of years, not over a period of days.
Graystone Investment Group
Graystone is an experienced Investment Group wholesaling properties in the Greater Tampa Bay market.
We have researched the Tampa Bay area neighborhood-by-neighborhood to determine where investments are likely to have the most return per capital. And unlike other wholesaling groups, we find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.