投资新手常犯的7大错误

Real estate investing is a exciting way to make money and accumulate long term wealth. Most of the country's millionaires made their money in real estate or use real estate as an investment vehicle to hold their wealth. Because of that many people try to make it big in the game of real estate investing. Unfortunately not everyone does, investing in real estate for profit is not easy but it is simple. If you know what to look for, what to avoid and you have a system in place. This is part one of a series about Investing In Real Estate. Part 1 is entitled the 7 Crucial Mistakes Rookie Investors Make.

 

Number 1 - Not having a Plan

 

Every realtor has heard from some wanna-be investor along the way saying, "Find me a good deal". There are hundreds of good deals every day on the mls system. But there is more to a good investment property than just price. What is your plan?

 

Is it a buy and hold?, a renovate and flip?, a lease option?, a wrap?, wholesale/ retail?, multi family?, single family? Suited or not? Commercial? Mixed use? The more you get "into" real estate, the more you will find out how much you don't know. If you do not have a plan or a strategy in place how will you know what path to take to get you there.

 

Number 2 - Not having a realtor

 

Real Estate Investing is a business! Not a hobby, treat it that way. Top business people succeed because of their well thought out goals, actionable steps and a team to execute and achieve the end result. Use a realtor! Preferably one who is an investor. Interview them and decide if you can work together. If so, these professionals will help you find what you are looking for and save you countless hours of time. A good realtor is worth their weight in GOLD.

 

Number 3 - Not using a mortgage broker

 

Finding the deal of the century is no good if you cannot close on it. Use a mortgage broker, again interview them to see if you feel you can work together. Are they an investor? Do they specialize? Investment financing has different requirements than financing your principal residence. Are they experienced?, what about specialty financing products? Can they provide the creativity and expertise that you need to run your business?. A good mortgage broker that understands investment property financing and the language is a crucial piece of the plan.

 

Number 4 - Buying on emotion

 

Does it fit your PLAN? The deal of the century comes along every week; of course it does not do you any good if it does not fit your plan. Do your number crunching. Know your numbers, have you done your market analysis of comparable properties?. Do you know the market rents? Have you done a cash flow analysis? Don't forget things like taxes, insurance, vacancy, repairs, property management, renovations and advertising expenses. Is it a good rent able property? Is it close to amenities, on a bus route and close to schools? Know your market and know your tenant profile. Does it fit?

 

Number 5 - To manage or not?

 

Are you going to be your own property manager or contract it out? This is a very important part of the buying decision. If you plan on contracting it out make sure you factor in these numbers. Missing these can turn a profitable property into an unprofitable investment before your first tenant moves in. Things to consider are: do you have the time? Do you travel a lot on business? Do you like people? Many an aspiring landlord became a motivated vendor shortly after because they simply found the people part of the equation, too much hassle.

 

Number 6 - Not getting a property inspection

 

Finally you have done all the research, found a great property, negotiated a great price and have been pre approved for financing. Is that it? I suggest always getting a property inspection. You need to protect your very sizeable investment. The inspector is trained to look for things that the normal person may overlook. Common items are old in efficient furnaces, under sized service panels,

 

Poorly done renovations not up to code and of course the, now cleaned up ex grow op. These at best could cost you hundreds in unforeseen repairs and at worst, in the case of the ex grow op thousands of dollars. What if there is mold? What if the mold remediation was not successful? You may be stuck with an un rent able, and now un saleable property.

 

Number 7 - Not screening tenants

 

Everyone has heard about the tenants from hell, the ones who trashed the place, parties all night long and the infamous 3 a.m. phone calls. Do you know what all of these horror stories have in common? The landlords did not do their due diligence on the perspective tenants. You did your due diligence on the property, you spent hours working with realtors, brokers, insurance agents, contractors etc. Then you let the first person with a handful of cash move into your new investment property. There are companies that do credit checks, background checks and will do your due diligence for you. It is better to have the place empty then to rent to the wrong tenant.

 

Number 8 - Real Estate is the way to get rich quick

 

It has happened, it is unlikely, but getting rich slow is fine with me. It takes a while; you need systems, determination and dedication to your goals. It takes hard work, unlike the late night TV infomercials. A solid plan with action steps will take you further than you imagined. There are numerous real estate investing clubs, books, websites and newsletters dedicated to this topic. Never stop learning, the more you learn, the more you find out how much more there is to learn.

 

 

 

(Views of this post: 574)