Published On: Wed, Jan 24th, 2018

5 Common Mistakes Made by Real Estate Investors

The real estate industry is one of the largest and most well-established in the United States. Because real estate is a tangible asset with almost no obstacles to entry, many people have succeeded in building an empire out of real estate. Although experience is the best way to learn, there are certain tips and tricks that you can use to avoid some of the most common mistakes in this industry.

photo Alina Ku-Ku via Shutterstock

Below are a few of them:

Limiting Yourself to a Specific Market

When you are considering how to invest your money, the home market might seem like the safest place to start since it is somewhat familiar. However, this may not actually be the best option.

Advances in technology have allowed today’s investors to research other markets across the country and look for better investment opportunities, so you would be wise to take advantage of them. These resources can help new investors seek out other opportunities beyond the home market and empower them to do business with top performing investment markets.

Over or Under Renovating

One of the keys to a successful rental property deal is to understand the ideal amount of renovation required. Investors must aim to renovate property depending on the condition of the real estate market in a given place. For instance, in the state of New York, renovations greatly vary from one neighborhood to another, even if both neighborhoods are in the same city.

Over or under renovating can be avoided by seeking advice from local professionals, including contractors, property managers, and real estate agents. These people are experts in the market and can advise you on the propriety of particular renovations.

Not Understanding How Debt Works

One of the reasons why new investors are faced with financial and legal problems, and may find themselves needing to hire a lawyer, is that they simply do not understand how debt works. New investors often take on expensive debt that comes with high-interest rates and low investment yields.

This often leads to negative cash flow, since the net income of the investment may be less than the amount that the investor has to pay for the debt. This is especially true for a timeshare purchase where interest rates can be as high as 17%! Know that a timeshare is not an investment and should be exited with the help of a timeshare exit company such as Wesley Financial Group.

This problem can be avoided by crunching the numbers of the investment deal and understanding how the property can generate enough income to cover the amount of the debt.

Doing Everything Yourself

New investors usually handle new real estate deals as a part-time job on top of their primary profession and tackle investment without asking for any professional help. This approach is often the reason why so many people fail in this industry.

To avoid any costly mistakes, you should seek help from real estate experts and have them available at your disposal, just in case you need some support.

Not Saving for Repairs and Maintenance

One of the most common mistakes investors make is failing to anticipate the regular expenses and maintenance costs of their investment. Remember that everything in your investment has a lifespan and will eventually need to be replaced. Therefore, you should save up enough money for the repair and maintenance costs ahead of time.

Author: Lovisa Alvin

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