common investment mistakes

Invest Smarter

There are certain investment mistakes which are common among investors, and by avoiding them you will be closer to avoiding losses while making gains.

Not Having A Plan

The most common mistake in real estate investing is not having a plan. Too often, investors purchase a home because they think the price is right. It’s only later that they realize they have no idea what to do with the property. Buyers often fall in love with a property before thinking things through. Create a plan and then find a house that fits that plan, not the other way around.

Not Doing Your Homework

Most jobs require some level of training before you actually begin working. The same should be true in investment real estate. Remember: this is your livelihood. Not succeeding in investment real estate can have a significant impact on your financial future. Thankfully, there are countless resources that  can be utilized to learn about investment real estate, including books, online information, as well as community organizations that are aimed at helping average people learn about and succeed in real estate.

Not Asking For Help

Being successful in investment real estate requires building a solid team of professionals. A team will need an appraiser, inspector, title and escrow company, and a real estate agent. If you plan on doing renovations and maintenance to your property, you will also need a general contractor and other specialists, such as electricians and plumbers. As an investor, it’s important that you spend your time looking for the next property to add to your portfolio, and not dealing with issues that can be delegated.

Paying Too Much

Do not be caught off guard. Paying too much is the number one reason investors don’t make money. As soon as you commit to buying a property, your profit is constrained by the purchase amount. Make sure to do your homework, so you’re not surprised by unexpected outcomes.

Misjudging Cash Flow

Often times, investors misjudge the amount of cash flow they need to cover maintenance and vacancy costs. Ensure that these expenses are built  into your budget, so you’re never scrambling for cash. Management costs also pose another big risk. Many investors plan on hiring a property manager without exploring the costs. Property managers typically charge up to 10 percent to manage a property and prefer larger complexes. Vacancies are common, and the owner pays all costs while properties remain on the market without being leased.

Not Having A Plan B

Investors have been known to buy a property with minimal exit plans. This usually comes down to selling or renting out the house without considering the risks. What happens if the house cannot be sold or rented? Having multiple plans to get out of a property, such as refurbishing, renting it out, or wholesaling and cutting losses. It’s important to have an exit strategy to be profitable in multiple circumstances.

Not Having Enough Volume

One deal at a time may work for someone trying to make cash on the side, but if the aim is to turn  real estate investing into a business, more volume will be needed. In order to create a consistent cash flow, you’ll need a pipeline of deals. Sufficient volume will help you find better deals.

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