Good real estate investments can generate healthy returns for decades – if not longer. As such, there’s little wonder as to why so many investors are eager to dive into the real estate game.
However, while sound real estate investments can provide consistently profitable, uninformed investments stand to bleed you dry financially. Although real estate investors have quite a bit to gain, they also stand to lose a considerable amount of capital if they aren’t careful.
Prime 4 Rookie Mistakes to Avoid When Investing in Real Estate
To help prevent yourself from making unwise real estate investments, make an effort to avoid the following rookie mistakes.
1. Failing to Look to Experts for Advice
Given how much capital you stand to lose from a bad real estate investment, it’s in your best interest to seek advice from experienced pros. So, if you have anyone in your life who’s dabbled in real estate investing or owned and/or managed investment properties, now would be the time to give them a call.
If no one in your regular circle has experience in real estate, consult with a dependable real estate investment company. In addition to walking you through the basics of location research and the tenets of a desirable investment property, the right company will be able to educate you on a plethora of effective real estate investment strategies.
2. Overestimating the Desirability of a Property’s Location
As any long-time investor will tell you, location is a crucially important factor in real estate. No matter how nice a prospective investment property is, it’s likely to prove unprofitable if it’s in an undesirable location. That being the case, fledgling investors would do well to remember that a nice property doesn’t necessarily mean a nice location.
To help ensure that you’re able to make an informed investment decision, take care to carry out proper location research before making a serious offer on a property.
This will require you to look into an area’s population, rate of growth, demand for housing, median income, local economy, and overall safety. For example, investors based out of the Lone Star State would do well to prioritize location research when considering real estate investment in Texas.
3. Overpaying For Properties You Become Enamored With
We all have our own ideas about what constitutes a desirable property. However, listening to your personal preferences over market research is liable to result in investments that you ultimately regret. Similarly, failing to properly research local property values before making a serious offer on a property may very well result in you overpaying for a property with an inflated price tag.
In order to prevent this, make a point of thoroughly researching local property values before proceeding to make an offer. You may discover that similar properties in the area are selling for far less than what the seller is asking for. And should the seller fail to provide an acceptable explanation for this disparity, you’ll be justified in insisting that they amend the price to reflect the values attached to similar properties.
4. Getting Talked Out of Inspections
Investing in a property that hasn’t been subjected to a professional inspection is always ill-advised. You may think that doing a personal walkthrough is enough to spot any outstanding issues, but as any seasoned investor can attest, this line of thinking is extremely misguided. A thorough inspection from a certified home inspector is absolutely necessary to make an informed investment decision, so no matter how insistent a seller is that an inspection not take place, you’d do well to stand firm.
Not wanting to make waves with a seller or place a deal in jeopardy is perfectly understandable, but purchasing an investment property with a plethora of outstanding problems generally isn’t a wise use of your money. So, regardless of how strong a case a seller makes against inspections, make sure they understand that without a professional inspection, there’s no deal.
While real estate investors stand to reap massive rewards, so too do they run the risk of incurring considerable losses. In many respects, real estate is among the clearest examples of a high-risk/high-reward field of investment. Fortunately, by avoiding a bevy of rookie mistakes, fledgling investors can effectively reduce some of the most common risks associated with real estate.
So, if you’re hoping to generate healthy returns with your first foray into real estate, steer clear of the blunders discussed above.