Everyone knows that real estate is one of the finer, more profitable, and more long-term investments that you can make. But that doesn’t mean that anyone can just get into the game, and begin making money. Far from it. It’s a business that is notoriously difficult to succeed in.
What draws people in is the relatively low entry barrier, and, while many succeed, there is a long list of people who did not. Usually, the failures come down to a handful of mistakes that could have been avoided. Below, we take a look at some of these errors. If you’re thinking of getting into the property game yourself, make sure you’re not guilty of them.
It’s not really possible to simply “take a chance” when it comes to property investment. One in a hundred gambles will be successful; the other will be failures. When people are presented with an opportunity that sounds good, the temptation is to jump on it.
It’s always important to keep in mind that we can be blinded by the potential of a property. We focus on the positives and ignore the negatives. It’s rarely a good idea to jump into anything without first taking a considered and thoughtful approach, but at least the damage is usually limited. When we’re talking about hefty sums of cash, the fall can be substantial.
It’s not enough simply to own a property. That won’t bring in any money — it’ll just tie your money up. As such, you’ll need to think about what you’re going to do with the property.
Will you live in it for a while, rent it out, or flip it? Different properties lend themselves to different plans. Whenever you’re looking at a potential home, think about where you’re going to take it.
If you don’t want to keep the property too long, but only learn that it’s in an area where people rent rather than buy, then you’ll be stuck with a problem on your hands.
Seeing It Through Their Eyes
By far the most common error — especially if we’re talking about mistakes that investors fail to see — is when people looking at properties judge the property by their needs and standards. You’re not the one who’s going to be living in the building; other people are. You are not buying the place for yourself.
As such, it’s important that you’re evaluating each place you see through the eyes of your future market. This is also recommended whenever you think about making improvements. You shouldn’t make an improvement based on what you’d like to see, but what’s right for the market, and for your profitability.
Paying Too Much
If there’s one thing to avoid, it’s getting your heart set on any particular property. If you become too emotionally attached, then you could find yourself in an unexpected bidding war, which is always dangerous — you’ll end up nudging your bid, and run the risk of overruling the budget you’ve set.
If you’re not buying the property outright, then work with a company that offers attractive investment home loan rates. There are few things more frustrating than going through the entire buying process, only to realize that you’ve overpaid — and are now locked into unsustainable payments. A clear overview of your finances, as well as an understanding of how much you can expect to earn,
Lack of Knowledge
Property is complicated. There are a million and one different things that go into the valuation of a home. It’s about much more than the four walls, roof, and the decor of the property.
It’s about the services, the local community, which end of the street it’s on, the proximity to public transport, and so on. These are things you can only understand if you’ve lived in the area, or, at least, know it very well.
You could buy a property with the intention of renting it to a family, only to find that every Friday and Saturday night it turns into a party town. You will know these things if you’ve done your research.
If you’re interested in a place but don’t know the area so well, then ask around. Don’t take the word of the person who’s trying to sell the property — they have their own agenda.
It’s important that property investors don’t get too focused on the cost of the property, which is only the beginning of expenses. You’ll need to leave some cash in the budget for all the things — taxes, maintenance, and the like.
This is especially important when you’re figuring out how much to charge for rent. You’re not just there to collect the check! You’ll also need to keep the property in good condition, update the appliances, and so on.
It takes a long time to build up the experience needed to own and manage properties. It’s not something that you can on your own, at least in the early days. When you’re first getting into the game, it’s recommended that you work with as many experts as possible.
You’ll need to pay a little more, sure, but it’ll be worth it. Over time, you’ll figure out the areas that require professionals, and which ones you can do yourself, but that’s later.
Don’t shortchange your venture because you don’t want to pay professionals; they’re experts — and charge money — for a reason.
Thinking It’s a Get Rich Scheme
The number one mistake of property investors: expecting it to make them rich, either quickly or in the future. As with every gamble, there’s always a chance that things can go wrong. It’s important that you don’t have all of your eggs in the property basket.
Treating it as a Side-Project
Finally, remember that property investing is a tough old nut to crack, and needs to be taken seriously. It will not be a small side project, but, rather, a professional business. In a game as competitive as property, only those who take it seriously and work hard can get ahead.