Real Estate Investor Mistakes

Are you new to real estate investing? You see, a real estate investment is often a huge financial undertaking. And this is the type of investment that can cause you significant financial ruin if you fail to do proper due diligence.

Ideally, if this is the first time you’re venturing into the world of real estate investing, hiring an expert can be your best bet against making certain classic mistakes. A property manager can help you invest in the right property and avoid common mistakes.

In today’s blog, we’ll provide you with a walkthrough of the mistakes to avoid as a savvy real estate investor.

Mistakes to Avoid as a Real Estate Investor

Not Having a Strategic Plan

Just like you would with any other investment type, you need to have a plan. Know exactly which real estate investment type you are going to make and your specific goals for investing, among other things. 

When there is a boost in the real estate market, resisting the urge to make a purchase can be difficult. However, to avoid potential issues, it’d be best to take a step back and analyze the situation first.

Determine what your investment strategy will be like. For example, what property you’ll be going for? Such as a single-family unit or a multi-family complex like a duplex or a triplex. Or, a vacation rental such as an Airbnb unit.

Next, determine whether there is sufficient demand for such rentals in the area.

Not doing Due Diligence

Don’t gamble your money by skipping the necessary research. Due diligence is key before making a purchase. Even when looking to buy a computer, for instance, it’s common practice to shop around to get maximum value.

This is especially necessary when it comes to large purchases such as a rental investment. It’s necessary to put in a considerable amount of time researching to ensure you get the best deal.

The following are some of the questions you should aim to answer before making the purchase:

• How much income can I expect from the property?

• What are the vacancy rates in the area?

• Is the property type in demand in this area?

• What are the potential operational costs, such as utility costs, HOA dues, and property taxes?

• What are the average property appreciation rates?

• Is the property you’re interested in located in a desirable neighborhood?

• How do you intend to manage the property? Are you going to hire a property management company or self-manage it yourself?

• What are your long-term financial goals for this investment?

• What is your overall risk appetite?

• Are you familiar with the local landlord-tenant laws?

• Why is the current owner looking to sell the property? Look for legitimate answers, such as retirement reasons or moving due to job relocation.

Not Involving Professionals

This is another mistake you should avoid as a potential real estate investor. This is especially true if you have no prior experience or are making an out-of-state investment.

When looking to make a huge investment, it’s always recommended to involve the right professionals. At the very least, make sure to involve the following experts:

• a real estate agent

• a property manager

• a reliable handyman

• a property inspector

• a property appraiser

• an insurance agent

These will help give you informed insights that can prove invaluable in your investment journey.

Not Considering the Needs of Your Tenants

Before buying a particular property, think about your target demographic. For example, what amenities and features they will be looking for.

Families with children often prioritize space, safety, and convenience when looking for a rental property.

As such you’ll want to ensure the property has:

• Secure entryways

• Sufficient bedrooms

• Enough storage

• Proximity to schools

• Location near parks and playgrounds

• Family-friendly amenities, such as playgrounds, community pools, and recreational facilities.

• Adequate parking

Overpaying for the Investment

Rushing to invest in a rental investment without due diligence can result in overbidding on the property. The result of this could result in living beyond your financial means. That is, being overwhelmed by the debt you have accrued.

You see, a good rental investment is supposed to be cash flow positive. A cash flow-positive investment means that the rental income exceeds the operational expenses. 

However, if you overbid an investment, it may result in a cash flow negative investment. This is where the operational expenses exceed the rental income, leading to losses.

To avoid finding yourself in such a situation, ensure you get a basic overview of the average property prices in the area. You could use reputable online rental listing sites for this or simply hire a property manager to do it on your behalf.

Conclusion

There you have it. Common mistakes that you should avoid when looking to invest in real estate. The best way to avoid such mistakes is to work with experienced real estate professionals.

A property manager, in particular, can help you make the right decision as well as help you with its management. 

Income Realty Corporation has been operating in the Miami real estate market for over 44 years now. We can help you with all your real estate needs, including full-service property management services.

Get in touch to learn more!