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.