My blog focuses on Financial Literacy/Money and Business/Entrepreneurship. Investing in real estate can be a very rewarding, but also very perilous if you don’t know what you’re doing. The following contributed post is entitled, 5 Common Mistakes to Avoid When Investing in Real Estate.
* * *
Investing in real estate can be a fantastic way to spend your money, especially when the comparison to keeping it in a bank, is not always going to be the best outcome.
With that in mind, there are great opportunities within property investment, but it’s also important to be aware of what common mistakes can occur. Here are five common mistakes to avoid when investing in real estate this year.
1. Underestimating costs involved
When you’re a newcomer to investing in real estate, you might not always consider what hidden costs can come from buying property. There’s hidden expenses like repairs and permits, or vacancy periods if you’re renting it out.
Not to mention legal costs to process the sale of the property, whether you intend to hold onto it or do it up and flip it. It’s always important to be aware of the costs that come with investing into property that lie beyond just the property price itself. It’s also worth budgeting for phantom costs that might occur in the process too.
2. Skipping on research and due-dilligence
Skipping out on research can also be a problem if you’re not careful, that’s why you’ll want to look at everything that comes with real estate investment so that you’re well clued up. A panic bid on a property without verifying anything could be what turns into an expensive nightmare.
Always research the property you’re looking to buy and everything around it. Check out the rentals in the area, what’s around it when it comes to local amenities and schools etc. What’s the crime levels like in the area? Not doing your due-diligence could leave you with a very nasty investment.
3. Falling in love with a property and getting emotionally involved
While it’s nice to find a property you love and that you end up falling in love with, it’s important to remember that you don’t want to get too emotionally attached to a property. By getting too emotionally attached, you’re more likely to make mistakes and allow your emotions to spend more money or lose more of it.
Set some strict rules when it comes to investing and be aware of the potential fallouts that might come as a result of investing. Be sure to work with the best realtor in order to get a property that ticks all your boxes.
4. DIY overconfidence
While you might be a dab hand when it comes to DIY, you don’t want to take on too much DIY that you realistically can’t do with your other commitments in life.
Overconfidence in DIY can also result in you making an offer on a property in which you might then not be able to follow through with. Always get professionals in to do this work that can’t do and make sure it’s affordable in regards to the investment.
5. No exit strategy
An exit strategy is important when it comes to investing because whether you’re on the up with your investment or you’re losing money fast, you want an exit strategy for it. Life happens and there are some situations where you might need to sell the property or switch up your intentions for it to make some money through rental for example.
Trust your instincts when it comes to investing in real estate and know that while this is a solid investment opportunity, it’s still a risky one.
