Investing in real estate remains one of the safest investments anyone can make. While commercial and residential real estate markets differ significantly, they are similar because both deal with property, and property, historically speaking, has always had value. However, just because investing in real estate is relatively safe does not mean it is simple or easy. Many people who start off investing in real estate assume they can do it solo and fail to see any potential pitfalls that come alongside investing in real estate. Just because land is a safe investment doesn’t mean you’re guaranteed a return on your investment. Further, it seems like people investing in property for the first time tend to make very similar mistakes. There are still plenty of necessary steps you need to take to make sure you’re investing successfully. With that in mind, here are some of the most common real estate investment mistakes and how you can avoid them.
One of the biggest mistakes people make is buying rashly without a plan. Often when the market is hot, it can feel like you need to invest immediately or risk losing out on a great opportunity. But if you are buying a house and don’t know what you want to do with the house until after the purchase, you’re in trouble. You should always plan what your goals with the property are. Make notes on the family’s size, residence type, and how the residence will be used year round. A large part of your planning should be based on research. Typical consumer practices can apply to some degree here. You’d research the investment of a television and compare different makes, models and price points. You should do the same with property. Compare and contrast various properties in advance to determine what type of space is best for you. Some critical questions you can ask yourself:
- Am I buying in a location that will have construction going on around it in the near future?
- Are there any natural disasters like flood planes or infestation that needs to be brought to your attention?
- Why is the property owner moving on from the property, how much did they pay initially, and how much are they asking for now?
- What needs updating, fixing, or renovating?
The most common mistake individuals new to real estate investing make is attempting to do it all independently. While it’s tempting to save money by doing all the leg work yourself, it probably costs you money in the long run. Professionals get to be professionals by making deals that benefit all parties involved. There are so many intricacies to any market; thinking you have all the answers on your own is hubris. Build out a good team of individuals you can trust to provide adequate information. Picking experienced real estate agents, home inspectors, and mortgage lenders are a great way to start building out your real estate investment team. Ensure that you find people you trust where you have a healthy relationship and share ideas that inform an understanding of your needs. Developing a strong team will help you secure a safe and profitable investment.