Investing in real estate can be a fantastic way to make money quickly or over the long term. However, just like any other investment type, some things can go wrong as well as right. In fact, some pitfalls can mean disaster for your real estate investment! With that in mind, it is worth taking some time to learn what they are, so you can do your best to avoid them!
Experts with too much input.
Realtors are, as a rule, wonderful folks. They are helpful and can give you advice on whether the property you are looking at suits your investment purposes, as well as what the area is like, and whether the price is reasonable.
However, it is important to note that while they are experts in their field, it’s also not their money on the line when it comes down to it. In fact, they make their money by selling those properties you are looking at, so they have a vested interest in getting you to buy.
That is why it’s always a good idea to take the realtor’s advice with a pinch of salt and be sure to consider your purchase objectively. Otherwise, you could allow yourself to be swayed in a decision that will ultimately cost you a great deal of money.
Not doing your sums.
Investing is all about whether the figures pan out or not. That means it’s vital that you do your sums correctly before buying any property for investment purposes. Sadly, property investing can be one the toughest to keep a hold on financially because of all the different fees and payments involved such as deposits, resources for renovation, and the cost of labor.
Luckily, some bright spark has come up with an investing calculator that is a way of simplifying all this, so you can more easily work out what you can expect to get back from your investment. What this means is that you can go into property investing with your eyes open, and reduce a lot of the risks that are involved.
Sure, people get annoyed if their stock prices go down, but the level of emotional attachment investors can get concerning real estate is something else. I think it has something to do with it being a physical asset, and where it gets confusing is that many property investors believe that the home or apartment they buy has to reflect them in some way.
The truth is though that this isn’t the case. In fact, it doesn’t matter one iota if the decor in the place you are leasing out for profit doesn’t match your personal style. In fact, it should be all about the type of tenant that you are looking to attract and your taste doesn’t need to come into it at all.
Of course, if you are leasing high-end furnished properties, then you can use a professional interior decorator who will be able to stage the home compellingly. However, make sure that you do don’t get caught up in choosing between hundreds of different taps, coverings, and wall colors for a rental place. Neutral will nearly always do!
Poor quality surveys.
A major mistake that real estate investors can make is that they don’t do the necessary research on the building before they buy. This can be disastrous because it means you may be left with a property that is nothing but a money pit. This being a term that means a place that needs so much costly work done to it that you have no hope of recovering your costs, let alone making any profit on it.
With that in mind, it is vital to get the best survey possible of the structure and check things like the roof, whether there is any subsidence, and even that status of the land that it is built on. Remember, this means renovating them has to be done sympathetically, and this is something that can cost way over the original budget you had in mind.
Lastly, there are a fair few decision that needs to be made when investing in real estate and getting these wrong can cost you big.
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In particular, the location of the property you are going to buy is a crucial one. Will you go for a popular area and risk paying through the nose, or take a gamble or an up and coming location and hope it pays off?
Both can cost you big if you pick wrong, and this can end up being a significant pitfall, so be sure to consider this choice carefully before taking any action.