While investing in real estate can often be a rewarding venture, this doesn’t mean the success is guaranteed to all investors. In fact, depending on the level of thought and research you put into your investments, you may find real estate to be the opposite of profitable. As many inexperienced investors come to discover, there are a number of seemingly inconsequential rookie mistakes that can ultimately prove financially ruinous. In the interest of making sound investment decisions, first-time real estate investors would do well to avoid the following blunders.
Not Consulting with Seasoned Pros
If you’re a total real estate novice, it’s in your best interest to seek the expertise of investors with ample experience. For example, if there are any real estate investors in your family or social circle, you’d be wise to pick their brains for the valuable info. Consulting with a knowledgeable real estate investment company or even mortgage brokers like lendstreet brokers to understand your buying power is another great way to learn the ropes and brush up on the ins and outs of real estate.
The right company can educate you on what constitutes a sound investment, point you in the direction of good investment opportunities and help you understand your financing options. When it comes to mistakes to avoid when investing in real estate, few are as consequential as not reaching out to experienced investors.
Failing to Research Property Locations
There’s a good reason many real estate professionals operate under the mantra “Location, location, location.” In many cases, the desirability of a property’s location plays an integral role in determining the desirability of the actual property. For example, a property that’s somewhat lacking in the amenity department is liable to generate considerable returns if it’s located in a populous area with robust demand for housing.
By the same token, a property that’s exceptionally well-maintained and teeming with modern amenities may be unable to fetch the desired profit if it’s located in an area with a shrinking population and low housing demand.
This is why it’s important to research the location of every property that sparks your interest. When conducting your research, devote special focus to the area’s population, growth rates, rental rates, median income and property values.
Not Understanding How Much Work a Property Requires
When investing in a home, rental property or business space, it’s important to know exactly what you’re getting into. With this in mind, make a point of having any property you’re interested in purchasing inspected by certified professionals. Detailed inspections can effectively reveal issues with properties that not even their respective owners are aware of. So, even if you’ve done a meticulous walkthrough of a potential investment property, you should still insist on having it professionally inspected.
As an investor, inspections stand to benefit you in a number of ways. For starters, if hitherto-unknown problems with a property are discovered, you’ll be in a good condition to request a reduction in asking price.
Furthermore, a detailed inspection will provide you with a solid idea of just how much work a property requires. Since many of the properties you look at will require some level of repairs and/or renovations, it’s in your best interest to know exactly how much work you’re in for if you decide to go through with the investment. Once you’ve received the results of the inspection, reach out to various contractors and obtain estimates for any work that’s deemed necessary. Next, present these estimates to the seller and request that the cost of the work be taken off their asking price.
If the repairs/renovations recommended by the inspection are necessary to get a property into habitable condition, you’re well within your rights to request a reduction in price. Should the seller prove amenable to this reasonable request, walk away from the deal and shift your focus to other properties.
Although investing in real estate can generate massive returns, it’s important to understand that there’s no such thing as a surefire success. Furthermore, without even realizing it, many first-time investors severely impeded their chances of making a profit. However, while there may not be a magic wand solution for the risks associated with real estate investments, there are numerous steps investors can take to minimize said risks – and avoiding the mistakes outlined above is a great place to start.