“Real estate has made more millionaires than any other asset class.” Sadly, it can also cause you to go bankrupt if you are not careful. The best way to avoid making expensive errors is to learn from the mistakes of others. This article goes through the five common mistakes of new real estate investors.
If you’re just getting started with real estate investing, these mistakes are crucial to avoid. Seasoned real estate pros may also want a refresher to be reminded of the fundamentals. Your balance sheet will thank you for not making these costly errors.
Mistake #1: Jumping into Investing Without a Game Plan
Real estate investors often give in to FOMO (Fear of Missing Out) and purchase properties without having a game plan of what to do with the property. Before dropping cash or getting a mortgage to buy a house, you need to make sure you have an investment strategy. What type of houses do you want to purchase? Are you looking for a family home, a vacation home, or a multi-family unit? Figure out your investment plan, and then look for properties that fit your strategy.
Mistake #2: Not Spending Adequate Time Researching
Before buying a $700 phone, most people spend time watching YouTube reviews, comparing different models, and asking lots of questions. Before purchasing a house, the research you do should be even more rigorous and in-depth.
Do your homework and understand the local market. Also, spend time figuring out your real estate game plan. What type of real estate investor are you: a landlord, house flipper, or property developer? It’s also worth looking at the competition in the area.
Mistake #3: Doing It on Your Own
Many first-time real estate investors make the mistake of doing everything on their own. They assume that since they have a couple of successful real estate deals under their belt, they can handle the process independently. But real estate is a bumpy business, and the process may not always go smoothly.
It makes sense to have a team of trusted experts who work with you. For example, businesses like Motivated Leads can help you find motivated seller leads in your area. You can then contact the sellers on the list and purchase properties for great prices, increasing the profitability of your real estate business. Other experts on your team should include a home inspector, an attorney, a real estate agent, and an insurance representative.
Mistake #4: Not Focusing on the Numbers
One of the biggest mistakes of new real estate investors is that they underestimate or miss some high costs and get overly optimistic about their numbers. As a result, they end up bidding on dud properties. It’s crucial that you crunch the numbers carefully before bidding on a property.
Mistake #5: Emotional Investments
Sometimes real estate investors make emotional decisions when buying or selling properties. If you let your emotions get involved, you could end up making the wrong choices and spending more than you’ll make on a home. If you’re feeling too attached to a property, refer to the previous mistake. Make sure to do a cash flow analysis and let the numbers decide. Always buy or sell based on the numbers and not your feelings.
The reality is that while real estate investing has the potential to fetch higher returns, it also has the potential to cause expensive losses. Fortunately, you can avoid these mistakes with due diligence, proper planning, and learning from the mistakes of others.
The author regularly writes about real estate investment and generating motivated seller leads. Also, he helps many real estate investors find motivated sellers through effective digital marketing strategies and ad campaigns.