Investment Mistakes

Investment Mistakes

Investment in real estate can be highly beneficial with decent returns for a long time to come. It allows you to build assets that you can see and also use. It also creates wealth for your future. A vast majority of the millionaires around the world have amassed wealth through real estate investment. However, there are also lots of people who burn their gingers with real estate investment because of some common mistakes. Knowing these mistakes and avoiding them can make sure you do not fail in your endeavor.

  1. Not securing sound financing

One of the biggest mistakes committed by rookie investors is bad financing. Many investors get kicked out or real estate market simply because they have not worked out their finances well. If you take loans at high interest rate, you are forced to pay high monthly installments that can balloon your costs and eat up into your profits. However, most lenders want you to provide collateral in the form of your own assets. This is how you can secure financing for a long period of time at low interest rates. Otherwise, you can land up in the net of private lenders where you pay high interest and consequently ruin your real estate investment business.

  1. Not choosing the location wisely

East estate investment is all about location. It is far better to buy the worst property in a very good location than buying a very good property in a poor location. This is because your property will not be in demand because of poor location. You will get low rental income and the value of the property will not appreciate as much as desired. If the location is such that it does not give quick and easy access to modern amenities, you will find it hard to attract tenants. Because of these reason, you should not commit the mistake of investing your money in a bad location even if you are getting a property at a very attractive price.

  1. Not doing your calculations right

Always follow the 1% rule when buying an investment property. If the monthly return in the form of rental income is less than 1% of the value of the property, do not buy that property even if you are getting it at less than market value. Also, do not ignore the resale value of the property as poor resale value can increase your costs and turn it into a bad investment. You can hire services of an experienced realtor to assess the resale value of a property to avoid committing this mistake.

  1. Underestimating the cost of repairs

Repairs and maintenance of a property can be very costly affairs. You should add up these costs to your overall costs when purchasing a property. Failing to do so will lead to cost overruns that can easily eat your profits from an investment project. Take help and advice of experienced realtors or contractors about estimated repair costs when buying an investment property. You stand to save a lot of money by paying small fees to these professionals.

  1. Getting cash strapped

Imagine taking part in a race and finding that fuel in your racing car has run dry. This is what being cash strapped can do to your real estate investment business. It is largely a result of bad financing though you can also run out of cash because of miscalculations about repairs and rehabilitation. Always make sure you have sufficient capital to handle your expenses.

  1. Not having a good team

Real estate investment is a result of good team work with professionals to handle different responsibilities to share your burden. Build up a good team made up of realtors, attorneys, and contractors who can help you when taking important decisions. Contractors who can help you with repair and rehabilitation and who can do the job in time at reasonable price can prevent lots of stress and also losses in any real estate investment business.