If you’re about to venture into the property market with one of your first investments, you might be worried about making some common property investment mistakes that can cost you your time, effort, and money. Well, fear not! While there are a bunch of rules to investing in real estate that can ensure you do not venture too far off track, we’re also going to list down some of the most common blunders that any novice investor might end up making in a hurry to strike gold.
Common Property Investment Mistakes
Some of the most common real estate mistakes made by investors are:
- Not planning in advance
- Not researching the market enough
- Hiring the wrong people for help
- Aiming for short term returns
- Spending more than your worth
- Not planning for unexpected expenses
- Not having a backup plan
Now, let’s talk a little bit more about these property investment mistakes and how to avoid them during your investment adventures.
1. Not Planning in Advance
Not having a plan in mind is one of the top property investment mistakes to avoid, and the solution is to make a plan before you begin investing in the property market. Property investment is usually a costly venture and regardless of how good or tempting an offer is, you must carefully think through your decisions and decide whether the opportunity is best with regards to your long-term goals.
If you’re buying a house for the first time, you need to carefully consider a number of factors, including the price of the property, your requirements, future upkeep costs, the growth potential of a property, and so on. Thus, do not rush into making a decision. Always make a plan in advance to avoid one of the most common real estate investing mistakes.
2. Not Researching the Market Enough
Buying and selling property demands a ton of research. It’s not just about where to buy a plot or which neighbourhood is the closest to your workplace. It’s also about knowing what kind of house you can build on that plot based on the regional zoning permissions and who your neighbours might be in a particular community.
Research is also needed for making all the financial decisions associated with property investments, including the average prices in a particular area, the demand for rental properties in a locality, and more. The lack of research is, thus, one of the most crucial property investment mistakes to avoid for all amateur investors.
3. Hiring the Wrong People for Help
From the real estate agent that you hire to help you in securing a deal to the construction workers that will be working on your property; you need to hire the right people to get the best results. For that, you need to get referrals from people you trust and ensure that you perform a small background check to determine that you are hiring the right experts for every task.
4. Aiming for Short Term Returns
One of the biggest mistakes property investors make is that they enter the market unsure of their returns or how soon they want a return on their investment. Both cases can lead to a lot of confusions, disappointments, and monetary losses. Hence, expecting quick and short-term gains is a property investment mistake to avoid if you are in it to make it big.
Real estate, in general, is an industry that pays off well in the long run and most seasoned investors will tell you to put your money into a development that will reap benefits over the years rather than in a quick grab-and-go scheme which might not be as profitable. The most common reason why real estate investments are generally made for the long term is that property investments are not liquid savings which can be converted into cash on a moment’s notice. You will undeniably lose money under such circumstances, which is why you must always consider the long-term advantages and potential of a property before considering it for your investment portfolio.
5. Spending More Than Your Worth
If you’ve done your market research right, you’ll always be hesitant about paying more than what a property is worth under any circumstances. However, what if you missed a major flaw in the structural condition of the house or a pest infestation that is going to cost you additional money to fix before you can put the house back on the market? Under such circumstances, you might end up spending more than your worth, especially if you spent nearly all your budget on buying the property in the first place.
On the other hand, if you are planning on renting the property, make sure the property is not vacant for too long. Vacant rentals become money pits that require funds on your end to keep them maintained but bring no income in return. Additionally, be cautious when you’re trying to find the right tenant for your property. Ask some essential questions from your tenants so that you know you’re renting the home to the right person, who will not only make timely rental payments but also maintain the property in its current state, rather than adding to your expenses in the form of additional repairs.
6. Not Planning for Unexpected Expenses
This real estate investing mistake is very similar to the one above. You shouldn’t be spending more than your worth when you’re investing in real estate, but while you make your financial plans for investment, it is advisable to set an upper-limit and set aside a fixed amount of your savings for emergencies and sudden expenses. These expenses could be personal, medical, or in the form of urgent or immediate home repairs.
7. Not Having a Backup Plan
Coming up with Plan A is good, but remember, there are 25 more alphabets to go. So, always have a Plan B! That’s right. Even if you’ve only invested your savings in real estate, make sure you not only diversify your portfolio by adding a range of localities and property types into it but also prepare for the worse case scenarios. What if you can’t sell your property for a long time? Will you put it up for rent? What if you can’t find a tenant anytime soon? Do you have friends or family who’d help you out or spread the word around? Plan for all eventualities, including what if your investment dreams fall flat?
Ultimately, know that even seasoned pros end up making some of these fundamental property investment mistakes by not researching their options and exploring the market enough. So, do not make a hasty decision while investing your savings into a venture.