- Being over enthusiastic, buying with emotion, not reason – Especially when first starting out, we are all anxious to make a deal. Even the bad deals could seem like they have a lot of potential. The worse a property looks, the more money to be made, right? Not necessarily. At first, as you learn the real estate business, your stock in trade is your desire, emotion, and enthusiasm. This of course is a good thing, for without it, you will not go far. Exercise caution, ask questions, and learn from those who have been there.
- Not working with accurate information – Knowing is better than guessing. As you gain more experience, your educated guesses will become more accurate. There is no substitute for accurate information. Confirm all information before taking a final step.
- Paying too much for a property – This happens, and usually is not realized until it is too late. This is one reason it is important to have accurate information. Having an emotional attachment to the property can cause one to pay more. Real estate has its cycles it goes through, and you may find yourself buying at the wrong time of the cycle.
- No cash reserves – This is common, especially among beginners. You can do all of your homework, and have accurate information, and there will still be unexpected expenses that come up. Have a back-up financial plan, just in case.
- Being greedy – In the movie Wall Street, Gordon Gecko is quoted as saying “Greed is good”. It is a great movie, but greed is not good. Take the profits when you can, don’t hold out for the pie in the sky riches. Sell for a realistic price. Rent for realistic market rents. A reasonable profit is better than no profit.
- Purchasing a property that requires too much renovation – Extensive renovation work does not always equate with a lot of profit. The best investment properties are the ones that require the least renovation work. Expect most of the time to clean or repair carpet, paint interior, and maybe repair or replace some minor plumbing and electrical. Renovating kitchens and baths can add much value to a house; it depends on how big of a project you want to take on.
- Underestimating repair cost – Have a qualified contractor give you a written estimate. Even then, you may come across some surprises after you purchase the property. From the basement to the roof, don’t take anything for granted.
- Buying at the wrong time – The contrarian investor philosophy says to buy when others are selling, and to sell when others are buying. This makes a lot of sense. Most people get caught up in the buying frenzy in an overheated market. Take a good long view of the real estate market going back at least five years, and project five years into the future, and see where you stand now. It just may pay to wait a while.
- Starting out full time – Many people have dreams of grandeur, and becoming the next real estate mogul. Whoever heard of a part time mogul? Now back to reality. Most real estate fortunes are made by people who work at it on a part-time basis. Keep the day job with the income coming in, you will need it also to obtain loans. When your real estate income exceeds your day job income, then consider going at it full time.
- Neglecting to have a home inspection – You invest a lot of time and effort into finding a potential investment. This could make or break you. Why would you not want to have a home inspection? This is a must for at least two reasons. First, if the inspection uncovers more than you expected or care to handle, back out of the deal. Secondly, the inspection can help you get a lower purchasing price from the seller. If the inspection shows that the house is in sound condition, and there is a not a basis to ask for a lower price, even better. In either case, it is money well spent.
Article Source: EzineArticles.com
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