When we’re talking about going after and seizing real estate’s best deals, even little mistakes can cost investors big time. Great deals are only great if investors carefully use their knowledge and skills to keep things on track. Otherwise, real estate deals can go south in a hurry. Going into details, there are four mistakes a real estate investor can commit that can unwittingly shoot themselves in the foot, making what could have been a great deal to an average one at best. By being aware of these mistakes in advance, Wallingford real estate investors can better avoid them in the future.
1. Lack of a Plan
Not having a plan in place before buying investment properties is probably the biggest mistake a real estate investor can make. Some investors think that the most important part of the process is to find a great deal on a rental house. But if you’re not sure about what you’re going to do with that great deal before making an offer, then that may turn into a problem. A better alternative is to move forward by figuring out your strategy and investment model and then find properties that fit. Otherwise, you may be stuck with a property that, although it looked like a bargain at the time, does not help you meet your financial goals at all.
2. Letting Emotion Rule
In addition to failing to plan, letting emotions guide your investment decisions can also turn a great deal sour. Some rental property owners search for a house until they find one they love, and they stop searching altogether. They let their emotions lead, making a mess of their investment strategy. That’s because once you’ve convinced yourself that you must have a certain property, you would overlook important warning signs and fail to negotiate properly— you may end up paying too much for it. To maximize your earning potential, you need to appreciate that buying investment properties is all about the numbers— and you have to stick to the numbers to make it work.
3. Skimping on Research
Experience really is the best teacher, there is no doubt about that. But it can be a really painful teacher as well. When it comes to investing in rental homes, letting experience teach you can be a recipe for disaster. To be sure that a great deal isn’t actually too good to be true, real estate investors must have an in-depth knowledge of each market they buy into and must also know all they can about a property before they buy. This also includes the condition of the house and market conditions, both present and future. Assuming a property will appreciate without any research to support that assumption is a clear example of how skimping on research can affect the deals— turning a great deal into a merely average one.
4. Miscalculating Cash Flow
Buying and leasing a rental property takes time and a certain amount of cash flow. Sometimes, real estate investors assume that the property they buy will begin generating an income right away. They will find out that that is an expensive mistake to make. Properties usually have upfront costs that will need to be paid before you get a single rent check. These costs could include things like repair or maintenance costs, mortgage payments, taxes, insurance, condo or homeowner association dues, and property management fees. If an investor hasn’t budgeted carefully for such expenses, that great deal they were looking at may turn into a serious financial liability.
The good news is that the right information and planning can help you avoid these types of expensive investment traps. This way, when you come across that great deal, you can go after it with confidence.
Real Property Management Southern Connecticut can be that source of information and planning for you. Don’t hesitate to contact us online or call us at 203-821-7303.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.