Although real estate investing is an age old practice, the emergence of television shows and publications specifically aimed at this topic have made it more popular in recent years. Don't be fooled. Making money from this form of investing takes proper planning and skill, it doesn't just happen. If you're new to this concept, make sure you know what mistakes to avoid.
Underestimating Renovation Costs
If your investment goal is to renovate the property and put it back on the market for a profit, make sure you aren't underestimating renovation costs. The average new investor has little clue about the real costs associated with this type of project.
During the buying phase, the home inspector tosses out a generic figure and the buyer runs with it and takes it as gold. Once they purchase the property and get a construction bid, they're shocked to discover the renovation will cost double this amount. You can avoid this type of event by getting an actual renovation estimate before you purchase.
Overestimating Selling Time
An identical home in the neighborhood sold after only 6 weeks on the market. Surely, if you purchase a similar home in the area it will sell just as quick? Wrong. The reality is that the needs of buyers always change and deals fall through every day so you can't put a time stamp on when you will sell.
When you overestimate just how quickly you will sell a property, you're asking for trouble. Given this scenario, an investor who only has enough capital to maintain the property while it's on the market for 6 weeks will be in a world of trouble should the sale actually take longer.
Going At It Alone
Don't make the mistake of embarking on the waters of real estate investing without a qualified shipmate. You need an investment professional on your side. Investment professionals play an important role when it comes to property selection and understanding your financial goals and needs.
An investment professional will help you choose the right property that will comfortably fit within your financial parameters and yield the greatest chance of profits. Performing a financial assessment and thorough market research is how this is achieved. When working with a professional you can have greater confidence that you're making the right choice.
With proper planning, you can yield positive returns from real estate investing so make sure you are thoroughly preparing.