Whether or not investing in real estates is a profitable move depends on the market. When the market is ripe, real estate investments have been known to return huge profits to the investors. However still, there are some serious mistakes that the investors must always watch out for before putting their money in real estate.
Investing in real estates can be a lucrative way for earning a regular income. A boom in the property market makes the likelihood of earning high end dividends from such investments even stronger. But, it would be wrong to assume that real estate investments are the safest way to quick bucks. If you plan to become a successful real estate investor, you need to watch your steps carefully.
10 Common Mistakes Real Estate Investors Need to Avoid
Investments in property can bring profitable returns in the long term. But investors need to avoid making the following mistakes in order to reap maximum benefits off the investment.
- Not Planning an Investment: Many of the first time investors begin their investments without a clear plan. It is important for every investor to first plan an investment strategy and then go ahead according to the plan. An investor must have a clear idea about what they would like to achieve over the next decade. Moving without a plan can get you into real hazards.
- Expecting Quick Returns: Once you decide to sink your money into the real estate sector, you should be prepared for a long journey ahead. Reaping returns off real estate investments is not an easy task and you should not expect it to be a source of quick bucks as well.
- Doing Things Alone: It would be a mistake to think you can manage your real estate investments all by yourself. You will need a team to look after your investments and also to make valuable suggestions for further endeavours. You must be in good terms with at least one real estate agent, a home inspector, an appraiser, a lender and a closing attorney.
- Overpaying for a Property: One of the most common mistakes made by investors is paying too much for a property. This is usually because of errors in the analysis of the true valuation of a particular property.
- Not Ensuring Financial Flexibility: Before buying a property, you must make sure that you have the financial flexibility to pay off the price in case you have bought it on mortgage. If you haven’t planned it beforehand, there are chances you might be pulled into a difficult financial situation when the interest rates rise.
- Ignoring the Costs of Owning a Property: Being an investor in the real estates you should not underestimate the expenses associated with owning a house. Apart from the mortgage payments, there are plenty of other expenses that you have to take care of if you own a property. A lot of money goes into maintaining a house that you have bought for investment purpose alone. The first time investors often overlook the secondary costs that accompany a purchase.
- Not Doing the Research: Like everything else, investing in property also requires you to do your homework before you take the plunge. If you do not know the basic rules and theories that run this industry you are likely to fall on your face. You cannot expect to learn everything on the field itself. Hence, training yourself on how things work in real estates is a task you cannot simply ignore.
- Skipping the Necessary Research Before Signing a Deal: Investors often have to finalise deals within a short span of time. But the importance of doing your research before you close a deal is paramount. This is where the newbies stumble. They often sign deals in a haste and pay the price later.
“Sometimes, new investors are buying property just based on the idea that the property is going to appreciate,” said Houston-based real estate agent Laolu Davies-Yemitan. “Usually, they don’t have any information to substantiate that.”
- Moving Without Multiple Exit Strategies: Many investors run out of ideas when their initial plans behind a real estate investment fail to return the desired outcomes. The property you bought with the intention to sell off when it’s the right time or rent it out if selling is not the right option might just lie there with no one to buy or rent it. Hence, always be ready with multiple plans when it comes to real estate investments. If none of the first two plans work out you always have a Plan C or Plan D.
- Pay Heed to the Timing: While it is the standard belief to always pay more attention to the location of the property, timing is also as much important. If you understand the market well and know when is the right time to make an investment or sell a property, you will be able to make a lot of difference.
Real estate investments could be a time consuming venture, but might bring you substantial returns if you do it right. The bottom line is, investing in real estates is not a child’s play and it requires serious planning and research in order to make the right moves. Hence, it is wiser to be wary of the risks that might be lurking in the corner and be prepared to deal with them when the time comes.
Author Bio :- Neeraj Kumawat is a marketing consultant at Great Richmond Rentals. He loves to shares his ideas on real estate, finance, money management etc. He loves travelling and reading travel books in the free time. You can find him on Twitter & Facebook.
April 6, 2017