Real estate is one of the safest investments you will ever consider. Due to the growing demand for good housing, you can be assured of a high income from your investment. However, if you’re just getting started, there are some common mistakes that you should avoid. Knowing these mistakes will help you to make the right choices and prevent financial loss.
Below are six common mistakes you should avoid when investing in property.
Failing to plan
The first thing you should do before making any type of investment is to plan. When it comes to real estate, the last thing you want is to invest in a property without knowing how it will generate money.
Planning is important, especially during the hot real estate market, because you may be unable to resist the buying frenzy. Therefore, you should take a step back and plan, including what to do if the market sours.
Before you apply for a mortgage or use your savings, you should have an investment strategy. Decide which type of property you want. For example, do you want a vacation rental? Commercial or mixed-use property? Think about your purchase plan, and then search for properties that fit your plan.
Over-attachment to a property
Most property investors get overly attached to their investment properties. This is understandable; after all, it’s your property, and it will affect the future of your finances. However, being overly attached to your investment can make life difficult for your tenants, especially if the attachment manifests as always checking on the property and enforcing many rules.
To avoid getting over-attached to your investment property, you should be as hands-off as possible. Not being involved means that you will not have to visit it frequently. You can do this by hiring a property management company to help you manage your property as per your specifications.
Focusing on short-term results
Most property investors enter the market without a clear picture of the returns they expect and the time needed for them to see a return on investment. This often results in regrets, misunderstandings, and losses. Therefore, if you want to get big returns, you shouldn’t aim for immediate or short-term benefits.
Overlooking tenants’ needs
When purchasing a rental property, you should first determine who your renters are – for instance, college students, single people, or young families. Single people will look for homes near transit and nightlife, while families want to live in areas with low crime rates and good schools. On the other hand, if you want to invest in a vacation rental, you should get a property near the beach or local attractions.
When investing in real estate, ensure that you pay what the property is worth. But what do you do if you miss a serious issue like termite damage? You will end up spending more on repairs, which could be more than it’s worth. When you overpay for a property, you may take several years to recoup your investment.
On the other hand, if you intend to rent your property, avoid leaving it vacant for long. A vacant rental unit can turn into waste very quickly and will demand money for maintenance without generating any revenue.
Not budgeting for expenses
Any property owner will tell you that there is more to owning property than making the mortgage payments. There are costs associated with ensuring appliances are in working order, yard upkeep, insurance, and property taxes. For these reasons, you should make a list of all monthly costs of running and maintaining your property before you purchase. Doing this will also help you to calculate your ROI and determine whether the income from your property is enough to cover maintenance costs and mortgage fees.
The reality is that if property investment was easy, everyone would be doing it. However, there are some common mistakes many investors make. Fortunately, you can avoid most of these mistakes by using the above tips.