Real estate investing is much easier to get started in than most people are led to believe. With the rise of crowdfunding real estate opportunities, and the popularity of real estate groups and REITs, new investors don’t have to have as much capital as they may have thought, and they don’t have to know it all to get started.
But just because it can be simple doesn’t mean that there aren’t some serious mistakes that can cause a new real estate investor to totally fail. If you don’t want to risk your first major investment, and lose the capital you saved up, pay attention to these 10 things and be sure that you avoid them.
1. Not Having a Plan
You cannot fly by the seat of your pants in real estate. While you do need to be flexible, you should have a plan in place, and a goal for every investment you make.
2. Not Negotiating a Better Price
Real estate investing is all about paying the lowest price possible, and selling for the highest price possible. If you aren’t willing to negotiate lower prices, or walk away from deals that are too expensive, you won’t make money.
3. Not Doing Your Research
Researching a property and the surrounding area is essential for every investment. You cannot rely on the information provided by a real estate agent (who wants to sell!), or a marketing agency. Be sure that you know for sure that every property you invest in has plenty of selling potential.
4. Assuming Real Estate Offers Fast Profits
Real estate investing is a long game. You’ll see cash flow early on with certain types of investments, but the real return comes after years of investing. If you’re in it to get rich quick, you likely won’t find the success you’re looking for.
5. Miscalculating Estimates
This is something that just takes experience to learn, but it can be a costly mistake to make. If you aren’t sure that your estimates for a remodeling project or other expenses are correct, be sure that you have someone with experience look over them. Even if you have to pay for their knowledge, it’s cheaper than going so far over budget that you don’t make any profit.
6. Going it Alone
Real estate investment careers shouldn’t be built on your own work and abilities. The experience of those who’ve been doing it longer than you, and the enthusiasm and buying power of those who entered the investment world with you, are valuable commodities that you should take advantage of whenever you can.
7. Investing One at a Time
If you are only investing in one property at a time, you aren’t really taking advantage of what the real estate market has to offer. You’ll waste more time looking for your next deal, not growing your portfolio, and not bringing in any cash flow, if you don’t have several projects going at once.
8. Lacking Multiple Exit Strategies
If you’re planning on selling your property in exactly one way, to a specific target audience, you are setting yourself up for failure. Ideally, every investment you make should have several ways that it can be sold or rented so that you make money, or at the least have a way out from under a lemon.
9. Getting Stuck with Bad Financing
If you ended up with a high-interest mortgage, a high monthly payment, a balloon payment, or some other bad financing situation, you are in for a rough time. Not only will you likely not make a great ROI on this investment, it’s also possible that you could be stuck with these awful payments for many years.
10. Letting Your Past Mistakes Stop You from Investing Again
Finally, the worst mistake that a new investor could make is to stop investing after a few mistakes. If you had a bad experience with a contractor, or you chose a house in a bad location, it’s easy to get discouraged. But real estate investing is a fluid market that is always changing. Dust yourself off, do some more research next time, and you’ll find your way to a successful investment career.