8 Real Estate Investment Mistakes to Avoid

8 Real Estate Investment Mistakes to Avoid post image

Turning a profit on real estate is often a quick way to make some extra cash. However, the real rewards come when you make long term investments in rental property that will only increase in value over time. If you are looking to invest in real estate in an effort to put money into your pocket, there are a few mistakes that you want to avoid. Use the following tips to help you make a smart investment in real estate.

Mistake #1 – Rushing in to a buy.

One of the biggest mistakes investors make is rushing in to a buy. When purchasing property for investment, every aspect of the sale must be analyzed. How much will you profit over the next ten years? Is the purchase really worth the time, money, and effort? Look at every aspect of the sale before you make the final decision on buying the property. Hasty decisions almost always end in destruction or loss of money.

Mistake #2 – Paying too much for property.

If you haven’t done your homework, you will be at risk of paying too much for property. The more you pay for property, the longer it will take you to see a return on your investment. Ensure that you are paying what the property is worth or less. Avoid paying too much for property so that it will be worth your investment.

Mistake #3- Expecting that you will get more for the rental property than you really can.

Many investors buy with intentions of renting out the property. The mistake comes when they “assume” they can get a certain amount of rent for the property, but in reality can’t. A bad investment comes when you have to rent the property out for less than what your monthly note on it is. Know how much you will be able to get in terms of rental money for the property before you make the decision to buy it.

Mistake #4 – Underestimating repair costs.

When investing in real estate, it is very beneficial to get a thorough inspection of the property. This will allow you to know how much to expect in terms of repair cost. You don’t want to have to put out tons of money upfront to get the property ready to rent out.

Mistake #5 – Buying in the wrong neighborhood.

Location is key in real estate. The better the location, the more you will be able to get for the rental property. Keep this in mind when buying. You will have to pay higher prices for homes in better areas but many times it is worth the investment when it comes to collecting rental fees.

Mistake #6 – Choosing the wrong renters.

This mistake is all too common among investors. If you are going to be a landlord, you MUST have a system for choosing renters. Applicants should be thoroughly checked out. References should be contacted and there should be proof of income. The renters you choose to put into the home will make the difference when it comes time for the fees to be paid. Be very cautious of who you choose to live in your investment.

Mistake #7 – Having too little insurance.

Investment property must be properly insured. Unfortunately, many investors fail in making sure the property is completely covered in case a disaster strikes. As an investor, it is your responsibility to make sure you are completely protected against disaster, injury, or lawsuits from renters. The more insurance you have on the property, the better off you will be.

Mistake #8 – Relenting on monthly inspections.

Often times, it is in the rental agreement that the landlord will be making monthly inspections. Unfortunately, not every landlord follows through with this. In an effort to know what is going on with your property, you must keep monthly inspections. This will also save you money as you will be able to keep up with the needed repairs on the property and can encourage renters to “fix” damage done by them.

Investing in real estate is without a doubt a money making business. Avoiding the mistakes above will help put even more money into your pocket.

Leave a Comment

  • Minerva November 19, 2011, 11:50 am

    Rushing to buy is definitely not the thing that what any person who wants to invest should not do. It would be much proper and okay if there are options and proper thinking before jumping into the decision of investing into a property.

    Reply
  • Austin TX property management companies November 21, 2011, 4:55 pm

    Buying in the wrong neighborhood. if in Google, content is king, in real estate, location is king. Location will help you sell with ease. Am I right?

    Reply
  • selling house November 28, 2011, 3:22 am

    Great post. Time and time again I see people paying for over-valued properties.

    Reply
  • Teyona @ Park City Real Estate November 30, 2011, 1:36 pm

    These 8 common mistakes are very important to know. For me, location is one of the most significant features someone must look for in a property. I really like your post, very valuable for those looking for a new property.

    Reply
  • Deer Valley Real Estate November 30, 2011, 6:33 pm

    Amazing and very useful tips. Paying too much for the property is I think what every buyer should be aware not to do when buying a home. So, it is a must that they study and decide well before buying a property.

    Reply
  • Oklahoma townhouse management December 4, 2011, 3:01 pm

    Wow. These are the kind of tips that every real estate agent should read. Very useful.

    Reply
  • Public Private Partnerships December 23, 2011, 6:03 am

    This is an interesting article for those investing in homes. As a primarily public commercial real estate developer (Garfield Traub Development) specializing in public private partnerships, we find that many private investors are liking the idea of investing on commercial real estate along with the public sector to reduce their risk and still have large return.

    Reply
  • Mack January 11, 2012, 1:42 pm

    Hey Kathy awesome post. The most important aspect which every homeowner should take into account is the proper selection of the tenants. Because I have seen many tenants that are not paying monthly rent on time and moreover they also damage the property. So homeowners should take their time in selecting the good tenants for their rental properties.

    Reply
  • kriskrohan March 18, 2013, 12:30 am

    There is one thing that everyone needs in life. This thing is money. There are plenty of people in life that have love, friendship and companionship but lack money. It does take money to invest in real estate. When you buy a property, one of the first things that you will have to do is qualify a tenant. You might purchase a turnkey property that has a tenant attached. This tenant might not last and you will have to find another. Learning what is an income to rent ratio for investment property will help you learn how to financially qualify a tenant. The entire purpose of owning your property is to earn enough to cover your own expenses. What is left could be your profit for your hard work as an investor.

    Reply