Top 10 Mistakes Real Estate Investors Make
Real estate investments can be very profitable when done right. But it does take a lot of determination, business acumen and hard work to establish a good real estate portfolio. In this article, we look at the major mistakes real estate investors make and how you can avoid them.
- Not Treating Real Estate Investment as a Business
Real estate investment is not just about buying and selling properties. It is a business, and it has to be treated like one. From the very first decision to buy a property, to all the minute details that need to be looked into before closing a deal, real estate investment is a full-fledged business.
Unless you start thinking like the CEO of a major business corporation, your real estate investment portfolio will never actually reach the heights you desire.
- Acting on Impulse
No proper businessman acts on impulse. You cannot just see a property one day and suddenly decide to purchase it. You cannot suddenly change your mind and decide to dispose off a property to the first bidder.
When it comes to real estate investments, you cannot just act on a whim. Every decision you make has its consequences. So if you really want to succeed, you’ll have to think everything through and then take a final call.
- Inadequate Research
Knowledge definitely is power in the real estate scenario. You cannot jump into a property investment without doing your homework. There are so many aspects you need to look into – location, building condition, market trend, prevailing rates, neighbourhood, proximity to essential services, legal issues, etc.
The more you know about the property you’re planning to invest in, the better prepared you will be. This knowledge will also fortify you against any nasty surprises after you close the deal.
- Trying to Do it Alone
When investing in property, you cannot even attempt to do it on your own. Even if you try, you’re sure to get stuck at some point. Well-meaning friends and relatives (and their advice) can only take you so far.
You need the help of quality professionals who are experienced in real estate investments. They will have a wealth of information they can impart to you, and help make better decision. A good real estate consultant will be able to assist you with all the legal, structural, and financial matters regarding the property you are looking to invest in.
- Not Planning Your Finances
Real estate investments are high-value transactions, and they require a lot of diligence and financial planning. You cannot try to make it happen without thinking about all the costs involved.
You will have to consider if you have the capital to put in a down payment, check if you are eligible for any bank loans, and ensure that you have enough income to pay the interest on those loans.
- Paying More than Required
The sad reality is that when it comes to money, people can take you for a ride. A seller might be quoting a price that is much higher than what the property is worth. A financial institution might be trying to fleece you with inflated interest rates.
It’s best to ask around, get the help of a real estate consultant, and double check that you’re not paying more than what’s actually required.
- Expecting Quick Returns
You cannot expect a quick turn around on your real estate investment. Whether you are renting/leasing the property out or planning to sell it off for capital appreciation, remember that time is your friend.
Your investment will not start raking in profits overnight. Just like any other business, it will take some time to grow after which you will start seeing your desired results.
- Underestimating Expenses
There are a lot of property investment expenses that you might not have budgeted for. Taxes, maintenance costs and repair work can put a dent in your pocket if you are not careful.
Inspect the property carefully and note down damages that need to be taken care of. Consider the age of the property and make sure you account for possible expenses that may crop up at a later date.
- Investing Without a Strategy
With real estate investments, it’s best not to go in blind. It’s relatively simpler to buy your first property as an investment, but what do you plan to do after that?
Have a plan in place and decide how you want to build up your investment portfolio. You also need to have exit strategies and backup plans if things don’t go exactly the way you like with respect to your property investment.
- Not Taking Any Risks
Any worthwhile decision in life does have a certain element of risk attached to it. If you want to succeed in property investment, you must be willing to take calculated risks. As mentioned earlier, you can’t go in blind, but you definitely need to understand the risks involved in real estate investments, and still be willing to take plunge.
When you know what the risks are, and if you have a proper investment strategy in place, the risks you take now will profit you well in the long run.
Property investments can be a huge money maker, as long as it is done the right way. I hope this article has shed some light on the major mistakes that real estate investors make, and how you can avoid the same.
Top 10 Mistakes Real Estate Investors Make
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