Learning from mistakes is an essential part of growth. That couldn’t be more true with real estate investing. Even the most successful investors have made mistakes along the way. The goal is to learn from your own mistakes, but more importantly, to learn from the mistakes of others. In this article, we’ll discuss common mistakes new real estate investors make and how you can avoid them.
Mistake #1: Paying Too Much for a Property
One of the most significant mistakes new real estate investors make is overpaying for a property. A good real estate deal starts with the purchase. If you overpay for a property it doesn’t matter how well you renovate it, or how good your marketing is, you will never be able to make money. Before making a purchase, it’s crucial to run all the numbers to ensure you’re making a sound investment that will bring a good return for you investment of money and time. Factors to consider include financing costs, repair costs, holding costs, potential resale value, average rents in the area, listing fees, agent fees, and tax and insurance liabilities. Taking time to do your due diligence before making a purchase can save you a lot of time, stress, and money.
Mistake #2: Not Accurately Estimating Repairs
When buying investment properties, especially older homes, repairs are almost always necessary. Before buying, you need to accurately estimate repair costs, factoring in your goals for the property to make sure you get a good return on your investment. Repair costs can be high and add up quickly, so it’s important to pad your estimate to avoid getting stuck in over your head. Older homes tend to have hidden defects and often starting one project leads to the discovery of other needed repairs. It can also be beneficial to learn how to do some repairs yourself if you’re capable. That is a good way to save money, but only if you have the knowledge and experience to do it right. The last thing you want to do is pay someone to redo work that you did.
Mistake #3: Not Doing Your Homework
Doing research on a property is essential to avoid making a poor investment. While an agent or company like ours can provide you with the facts, it’s essential to learn about the community, commute times, HOA fees, and other factors that may impact a potential buyer or tenant. A property may look good on paper, but there could be hidden factors that make it less desirable to buyers or tenants. At 1-800-2SellHomes, we take pride in learning about all the details of a property before selling to another investor.
Mistake #4: Not Being Able to Find Tenants or a Buyer
Another mistake new investors make is buying a property that sits empty, not generating any income. Before making a purchase, ensure there is demand for the property by researching the area’s properties for rent or sale. There are lots of resources out there to help you determine this. One of the best is Rentometer. You can enter in the address of your property and some details, like the number of bedrooms and bathrooms and it will give you a list of rental properties in the area and how you potential investment compares. This will give you an idea of what buyers or tenants are looking for in the area and help you determine if the investment is worth your time.
Mistake #5: Trying to Do It All on Your Own
Building a strong team is critical to real estate investing success. Trying to do it all on your own will waste your time and money. A successful investor knows when to call in backup, including agents, buyers, wholesalers, title companies, legal teams, construction crews, and more. The skill set of a successful real estate investor is more about team building then being able to do it all. Having agents and other investors that you work with on a regular basis is a great way to make sure you buy the right property. Having construction, renovation and/or clean out crews at the ready is also important to make sure that when you buy a property you can turn it around quickly and get it rented or sold so you can monetize your investment quickly and move on to the next project.
At 1-800-2SellHomes, we help both buyers and sellers throughout the Oklahoma City area. Whether you’re a seasoned investor or a first-time buyer, our team can help you avoid common mistakes while finding the best properties for sale. Contact us today to learn more about how we can help you achieve your real estate investment goals.