When it comes to going after and seizing real estate’s best deals, even little mistakes can cost investors big time. Great deals are only great if investors use what they know carefully to keep things on track. Otherwise, real estate deals can go south in a hurry. Being more specific, there are four ways that real estate investors can unwittingly shoot themselves in the foot. These errors may turn a great deal into an average one at best. By knowing about these mistakes, Catonsville real estate investors can see them coming and better avoid them in the future.
1. Lack of a Plan
Maybe the biggest mistake a real estate investor can make is thinking they can just dive right in and buy investment properties without a plan in place. These investors think that if you find that great deal on a rental house, you’re guaranteed success. But if you have no set goals and plans for that great deal you’ve spotted, and then you jump in and make an offer, you may be getting yourself into trouble. By figuring out your strategy and investment model and then finding properties that fit it, you’ll discover a better way to move forward. Otherwise, you may be stuck with a property that, although it looked like a bargain at the time, does not help you meet your financial goals at all.
2. Letting Emotion Rule
Together with failing to plan, letting emotions guide your investing decisions can sink a great deal quickly. Some rental property owners search for a house until they find one they love, and they stop searching altogether. They let their emotions lead, making a mess of their investment strategy. That’s because once you’ve made up your mind that you must have a certain property, you would now overlook important warning signs or end up paying too much for it. To maximize your earning potential, you need to appreciate that buying investment properties is all about the numbers— and you have to stick to the numbers to make it work.
3. Skimping on Research
Experience really is the best teacher, there is no doubt about that. But that doesn’t mean you you should rely on it entirely. When it comes to investing in rental homes, letting experience teach you can be a recipe for disaster. Real estate investors need to have an in-depth knowledge of each market they buy into so that they can be sure that a deal isn’t too good to be true. On top of that, they must also know everything they can about a property before they buy. Included in what you need to know is the condition of the house and market conditions, both present and future. Assuming that a property will appreciate without any research to support that assumption is one sure way for a deal to be merely average instead of reaching its potential.
4. Miscalculating Cash Flow
Buying and leasing a rental property takes time and a certain amount of cash flow. Real estate investors sometimes make this expensive mistake: They assume that the property they buy will begin generating an income right away. Most properties tend to have upfront costs that will need to be paid before you get a single rent check. These costs could include things like repair or maintenance costs, mortgage payments, taxes, insurance, condo or homeowner association dues, and property management fees. If an investor hasn’t budgeted carefully for such expenses, that great deal they were looking at may turn into a serious financial liability.
The good news is that with the right information and planning, these types of expensive investment traps can be easily avoided. This way, when you find that next great deal, you can confidently pursue it.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.