6 Mistakes People Make When It Comes to Real Estate Investing
Real estate investment is generally depicted as a safe investment with a convenient process that is beneficial to all. This is often misconstrued by investors who begin to think that the entire process is ridiculously simple and profitable. More people are jumping into the market without realizing what they are doing. People tend to take a gamble and then end up getting in over their heads.
1. Lack of Knowledge or Experience
If you are going to rush into real estate investment without any prior research or knowledge, you are more likely to face greater obstacles. You need to be aware of vacancy issues, tenants’ behaviors, repair, and maintenance bills, and much more. If you have no previous experience with real estate, not learning the ins and outs of the business can be a big mistake.
Experience teaches many things and helps you take advantage of good opportunities and avoid any purchases during the wrong side of a market cycle. You can end up making the wrong decisions, such as buying a property that is not attractive to tenants or a property that is not beneficial for your portfolio.
2. Buying the Wrong Property
The most common mistake that people make is to buy the wrong property, which can lead to huge losses on your investment. Before buying a property, you must consider issues that tenants usually face. You should look into what attracts tenants and what type of tenants you are looking for. This means that you should look at factors like availability of parking, privacy, utilities, and the neighborhood, etc., to prevent tenant turnover. Always remember that every time you lose a tenant, you will lose money as well.
You must also consider repair issues before investing. For example, if you buy an old house, you must be aware of how much it will cost to repair and maintain the house so that it can be sustained over a specific period. It does not make any sense to spend more money on repairs every month than the rent you are getting.
3. Ignoring The Right Tenants
Another common mistake that people make is not to do enough research about the tenant’s market. You should be sure about the type of tenants that you want to keep. You should also consider what type of communities will be attracted to your property. We recommended creating renter profiles you would like to lease your property out to – and then seeking a location and building a home that this profile would be attracted to – this strategy tends to work for many real estate investors – instead of purchasing a building first and praying for the right tenants.
For example, if the house is located near good schools and public transportation, you will have many young parents attracted to the property. Once you have learned about the community which your ideal tenants belong to, you can come up with better ideas of how to attract them.
4. Overestimating Rental Prices
Most people think that earning income from investment properties is a sure shot. However, it is not always true. People often tend to analyze their properties incorrectly and overestimate their rental properties. You need to conduct proper research on the average rental rates for each area and the type of property that you are buying. Some properties get higher rental rates, and others do not. You need to have sound knowledge regarding these rental processes before getting into the business.
5. Not Maintaining a Relationship
Another common mistake that people do is that they believe that their job is over once they have rented out their property. But the job is much more than that. Maintaining good relationships with tenants is a crucial part of the job which most property owners forget about. You have to be involved with your tenants, address their concerns about their homes, and provide them with benefits that would keep them happy. Finding new tenants is a time consuming and costly process that is going to eat away your income as well as your energies.
You must be proactive with all your investment properties. For example, conducting walkthroughs and going the extra mile for your tenants is always appreciated and beneficial for your relationships in the long run.
6. Not Taking Care of Responsibilities
People often forget that being a landlord means to take on several responsibilities. You are in charge of repairs, cleaning, and maintenance of the property. You are also in charge of finding the right tenants, advertising your property, screening potential tenants, and then getting them interested in your property.
Each task requires a different skillset and knowledge. You must learn to juggle different roles all at once to manage your portfolio successfully and navigate through the challenges of real estate investment.