Real estate investment is a lucrative and a profitable business, provided you’re willing to put in the time and effort required to educate yourself on its nuances.
Even if you have the money and the resources to build an enviable real estate portfolio, it does not make financial sense to go on a buying spree without analyzing your past and current projects in terms of the type of property, profitability, ROI, and so forth.
For starters, take a look at the six mistakes often made by new investors, which you can easily avoid with a little planning and foresight.
Not hiring a professional home inspector
Home inspection is a crucial part of the real estate investment process, and those who undermine it or avoid it to save a few hundred dollars often end up spending a fortune on costly surprise repairs later.
A seasoned home inspector can find out concealed faults in a property and help you strike a better deal or advise you to drop a deal altogether, thus saving you thousands of lost dollars. So hire a home inspector for every real estate investment, however small.
Pinching pennies when hiring contractors
As you already know, the quality of renovation or remodeling can make or break a real estate deal. Good craftsmanship shows in the final outcome and greatly affects the price that a refurbished property can fetch for you. So choose your contractors with care and don’t hesitate to pay a little extra for quality work and materials.
Not verifying facts
Whether it’s the sale price or the condition of a property you’ve set your eyes on, there is no harm in trusting the word of your agent. But making the grave mistake of not verifying the facts stated to you can land you in a soup.
With so much money at stake, it’s important to verify that you’re getting what you’re paying for. Before investing in any type of real estate, have an appraisal done by a disinterested and unbiased certified professional to ensure that you’re paying the right price and getting what’s been promised. Get independent reviews that can identify potential risks you should know about before signing on the dotted line.
Underestimating the additional costs
Inexperienced real estate investors often make the mistake of not including the many costs that are part and parcel of a owning a home, whether for personal use or for renting. From buying a property to maintaining it until you find the right buyer or tenant, there are multiple expenses that you must take into account to arrive at a realistic number indicating how much it will cost you to buy, revamp and resell an asset.
Some examples are loan processing fees, closing costs, home insurance, title insurance, prepayment penalties, utility subscription and cancellation charges, monthly maintenance costs, property taxes and so forth. Make a list of all expected expenses as it can drastically affect the profits you’ll make from reselling.
Not having access to sound legal counsel
The legal complexities of flipping or investing in a property go far beyond the basic understanding of most people. Every transaction can bring up a new legal or non-legal issue, and to navigate these challenges and protect your interests, it is important that you employ the services of a seasoned real estate attorney, who can prepare, review and guide you through the complicated documentation and ensure that your rights and interests are protected.
Becoming a successful real estate investor is easy if you have the funds and the right professional guidance. With large sums at stake, it makes sense to entrust your real estate transactions to a law experts like Coover Law Firm known for their expertise, integrity and reliability.
Falling for a property that the seller isn’t motivated to sell
A professional real estate investor who’s in the business for the long term knows where to draw the line when it comes to obsessing over a property they love so much that they’re willing to overlook critical aspects of the purchase contract. When a seller is not really desperate to sell their home, you should move on rather than end up paying way more than your budget and regretting it later.
The same applies to your existing properties, especially the ones you’ve rented out. Maintaining a professional relationship with your tenants is crucial to ensure that your yearly rentals grow in line with market trends, or sooner or later you’ll feel the pinch and feel frustrated with your past decisions.