Categorized | Real Estate

5 Mistakes to Steer Clear of When Investing in Property

Putting your money in real estate has always been seen as a smart decision. This is especially true when it comes to the current period of economic rebound in which property prices are due to soar in the next few years. There are, however, many pitfalls to look for when investing in any sort of home. We’ll list five of the most important below to give you a better chance of making a smart property investment decision in the future.

  • Don’t plan things on the fly. Many people spot what they think is a good deal on the real estate market and then buy it without having a clear plan as to what to do next. This is a very backwards way of investing. A smarter solution is to figure out a plan before purchasing any sort of property. Determine whether you are going to buy to rent, renovate or demolish first and then seek out some real estate that fits in with this goal. You’ll have a much easier time of reaching your aims with the appropriate home to aid you.
  • Don’t work alone. The real estate market is a complex one, requiring years of experience to successfully navigate. It is folly to think you can tackle the task of purchasing a viable investment property by yourself. Instead, you will be better off finding a qualified real estate agent, appraiser, inspector, closing lawyer and financial institution so you can cover buying and selling in the right manner. If renovating, you’ll also need to hire those specializing in remodeling  cleaning and maintenance. Working by yourself here will force you to spend money doing tasks such as sweeping, fixing leaky taps and more when you should be managing your property portfolio.
  • Don’t skip the research. Even though you’ll work with a host of professionals as stated above, it is not a smart idea to spend a small fortune without doing some homework. Yet this is precisely what many people do, throwing money at property without gaining an idea of whether it’s a good investment or not. Just as you’d use a pension calculator when figuring out how much you need for your retirement, so too should you work out the numbers before purchasing some real estate. Look at market rates, legal fees, property taxes and other relevant issues by reading the appropriate websites or real estate guides.
  • Don’t ignore your cash flow. When purchasing a house or apartment, it is always important to remember that the value won’t automatically go up. Many investment amateurs fail because they forget to consider the costs of renovations and repairs while owning that property. Misjudging expenses like this can place extra financial pressure on the investor and can lead to further debt simply to cover the costs. Thus, you should put some money aside for these expenses, so that you can conduct the necessary repairs and maintenance without struggling. Also find out whether these remodeling costs will result in financial profits or losses later on.
  • Don’t go in without a backup plan. Let’s say that you purchase some real estate to rent it out. What happens if you can’t find a suitable tenant for the price you’re asking? Your home will just sit there without generating any income as promised. The smart investor will have a Plan B through which they can find some extra capital if their first strategy fails to succeed. Having only one plan of approach when investing in property is definitely a bad idea as you don’t want to end up with useless real estate that fails to help you reach your goals.