5 Mistakes to Avoid when Investing in Real Estate

Published | Written by Liz Kaye

We may sound like a broken record at this point, but inventory is still low and demand is still high. The market is truly at its peak and, rightfully so, everyone wants a piece of the pie. Before you can cash in, however, it's important to avoid common mistakes many beginners make when they first start investing in real estate. Below, you'll find a list of 5 things to watch out for before making that commitment.


You want to love the property you buy. After all, you can't invest in something you don't believe or see potential in. The problem occurs, however, when you get emotionally attached to that property. Likely, your end goal is not to live in the home yourself. So, it doesn't make sense financially to let your emotions dictate a decision. When you allow your heart to do your thinking, your wallet pays the price. In most cases, you will succumb to paying more for a property than it is worth. Buying an investment property for the right price is the most important detail to lock in when you begin your investing endeavor. 


As a beginner, you initially won't know terminology and number diagnostics. Aside from this being a skill you will develop over time and with experience, it's important to turn to other experts in the industry. Read one marketing flyer? Listen to one speaker? Run one survey? You've chosen to take a shortcut and it will show. Don't assume every expert or expert source doesn't have its flaws. In fact, don't assume every two or three are perfect either. To be a well-rounded investor, you must fact check and verify the information you consume. Crunch your own numbers with the formulas you find. Compare speeches on similar topics being discussed. If you are armed with your own facts and confident in the time you've spent doing your own research -- you will catch mistakes and be steadfast in negotiations.


Proximity is crucial in any investment, regardless if you have a property management company hired or not. Ultimately, it is your money that has been spent and is continued to be spent. You will need to do your fair share of "check-ins" to ensure the property is being ran to your standards. It is simply not feasible to travel 3+ hours or catch a flight to examine how your property is being ran, or diagnose why it is not making a return on your investment. You must maintain a hands-on approach.


Or having some in the first place. Without objectives in mind at the start of your investment, you are unable to hold yourself accountable for any progression. You can't have a plan without knowing what it is you're working towards and the steps it takes to get there. It is pivotal that you ask yourself trying questions prior to making any decisions (including what property you buy). Financially, you need to know what your return on investment is going to be and at what price you need to secure the property to make that happen. An investment will require renovations. How much money do you have to put towards these? What changes can you make within that budget and, more importantly, what problems are you unable to solve? Will you be the face overseeing the investment as it's ran, or do you plan to hire out locally?


Loan pre-approval is a process and one that both the borrower and the property must qualify for. It's important that you know prior to your meeting what questions you will be asked as to assure your ducks are in a row and you're not missing an important piece of the puzzle. You don't want to get to contracts and find out that your loan is denied because criteria doesn't meet the lender's requirements. This can happen and you can't assume something won't slip through the cracks at the initial start of the process. The only way to guarantee credentials are verifiable across the board is to investigate the investment and your credit history prior to diving into a property commitment.

Did you miss our last post? The lake is FULL of investment properties that are already well on their way. Drop which one you're looking at in the comments below!

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