10 Tips for Real Estate Investors
Maybe you’ve heard that your first real estate investment is the hardest of all. Well that is true. Your first business is difficult because you do not know enough about the subject. As you might? If you have never bought a property before.
However, for something you start, you must go ahead and venture into the investment, because if you expect to be 100% ready, you will never progress.
But beyond that your first real estate business is not the most perfect, you can make it not so bad as to get you out of the game.
Here we will present you the 10 mistakes that you should avoid when you make your first real estate investment. Use this list as a model to follow to avoid reaching the worst scenarios.
When you prevent the worst from happening, you will gain confidence and you will be able to close your first business, get ahead, and start your real world education.
Error n ° 1: Bad financing
This can be the most lethal mistake. More real estate investors are seen losing money or getting out of business because of bad financing than for any other reason. What does bad financing mean? Well, a combination of high interest rates, adjustable interest, high monthly payments.
Most residential mortgages offered by banks save you from at least some points: usually interest is low, the mortgage is fixed at more than 10 years with the possibility of amortization, and there are no balloon payments. But they almost always require personal resources, which means that you, personally, must guarantee the loan with other assets and future profits. This is possibly a fair pact. You should avoid commercial, portfolio or private lenders because they will make it more difficult for you to close your first business.
Error n ° 2: Bad location
The value of real estate always begins with the location. People and businesses that rent or buy a property start looking for the location of it, and then evaluate other criteria such as the land and the house as such.
For this reason, you should study the best and worst locations in your area before buying. There are investors who make a lot of money in bad locations, but it is a complicated challenge that you should avoid if it is your first real estate investment.
Error n ° 3: Bad evaluation of the revaluation or value of the rent
As an investor, you should try to enter into the mind of your final consumer: potential buyers or tenants of the property. So you can clearly understand what they are looking for, and therefore what is best for you. Thinking that you can resell the property twice as much as it cost you is illusory, or that you can rent it for a fee above the market in the area, so you must be assertive when choosing.
Error # 4: Undervalue repair costs
This is something difficult to avoid. But you do not want to run the risk that large amounts of money go to repair the property and you run out of liquidity. You can ask for quotes before closing the purchase, or learn a good system for estimating repair costs.
Error No. 5: Run out of cash
A good investment requires cash flow to be able to assume the capital costs. In the case of a property, you can not run out of cash because if you have an unforeseen event, such as the need to change a roof or replace the air conditioning system, you should be able to react.
Otherwise, this will lead you to lose more and more money, becoming a big problem for your investment.
Error No. 6: Let your emotions handle your decisions
This is a common mistake among new investors. And it is understandable. But you must balance your enthusiasm with a cold, strong and objective analysis. Although emotions drive you to achieve your goals, there should not be a financial decision based solely on this.
Error N ° 7: Choose a bad real estate strategy
Real estate investments have many strategies. You will never find the perfect one, but you can get one that fits your strengths, short-term needs and long-term goals. So do not copy someone else’s strategy, evaluate what is best for you.
Error N ° 8: Choose bad contractors
Getting contractors to do a good job, finish on time, clean up what gets dirty and charge a reasonable price is harder than getting a treasure buried on a beach. So advise yourself with those who manage this staff, so you do not spend more time and money than really necessary.
Error N ° 9: Do not use the period of due diligence
Some experienced investors offer quick business closings without a due diligence period. This can help you get a lower price in the business but if it is your first investment it is not the best route to follow. Try to have even a short and reasonable one to get out of the sale if you get a problem with the property.