People love real estate! Who hasn’t watched a show featuring a stunning home transformation that has resulted in turning a huge profit in rental income?
The appeal is hard to ignore and, for some, this gives way to dreams of financial freedom through property holding. It’s always good to be prepared before diving into any new arena, and real estate investment is no exception. Just because you’re a rookie, it doesn’t mean you have to fall into common rookie pitfalls.
Having no plan equals a bad plan
Being a lone wolf
Dodging due diligence
Fluffing the financials
Reaction over reason
There can be a great deal of profit made from investing but the road to reaping those riches can be long and treacherous if you’ve failed to map out a reliable route. Many first-timers make this classic mistake. Following a strategic plan along with creating long and short-term goals will lead you in the direction of lucrative investments.
Instead of buying a frugal find on a whim, decide how much you are willing to invest as well as the time you are willing to put into your investment. Research the type of investment that works best for your capital-to-time ratio. Whether that is buying and flipping for profit or becoming a landlord, knowing what these types of investments entail will give you a leg up on deciding the property that will best suit your needs.
This is not a do-it-yourself thing. In addition to your real estate investment plan, surrounding yourself with the right people is key. Get to know which professionals are needed in smoothing the investment process and get to know them. These can include a financial advisor, mortgage broker, home inspector, real estate lawyer, appraiser, and, always integral is having a trusted Realtor® on your side. To get the upper hand in choosing the best professional for you, ask about their experience with real estate investing, both as a Realtor® and as an investor.
Acquiring a mentor is a recommended best practice to help ensure you are reaching your long and short-term goals. Here are some tips to help you find a great Realtor®: 5 Questions to Ask When Interviewing a Realtor®
Deals can happen rapidly. Signing away your life savings without fully considering the costs, renovations, previous income statements etc. can be one of the biggest mistakes made by beginners. Do your homework and know what you are getting into before handing over that hard-earned deposit.
Unless you are an accountant, understanding all the ins and outs of cash management on your investment can be overwhelming. Make sure you are seeking help with an experienced financial advisor to avoid underestimating costs of holding property and to ensure sure you can afford it.
Longer than expected vacancies can happen and you need to be prepared for unanticipated maintenance, repairs and general costs such as taxes. A great strategy heading in would be to high-ball the expenses and low-ball your income. This will help in dodging any possible pitfalls when it comes to managing your cash flow.
Investing in real estate is a business so set your mind on that from the very beginning. Falling in love with a property is not going to get it sold or leased. Always keep the bigger picture in mind to avoid this giant blunder. Emotions can muddy the waters of good judgment, making negotiations more drawn out and run the risk of going over and above your planned budget. Heeding your heart’s desires rather than following a strategic plan is bound to get you trapped and strapped.
Avoiding these vital mistakes is going to get you closer to your dreams of living a life of financial freedom. You will have the security of a well-mapped plan and the support of professionals who have the expertise to keep you on the right track!
Mark FarisCEO & Broker
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