Mistakes to Avoid for First-Time Real Estate Investors
Chris and I were recently asked to participate in an article with tips for the First-time Real Estate Investor. The resulting article was a veritable Bible of great information from 26 real estate professionals. Following are the top 5 consistently shared tips: (you can read the entire article here: 26 Real Estate Experts Reveal Top Mistakes Made By First-Time Investors
1. The top mistake that most real estate professionals see with first-time investors is that they don’t thoroughly understand the costs involved. Many would-be investors underestimate the costs of purchase, renovation, carrying and marketing the property. They often come up short when they don’t have enough cash to cover surprise expenses.
2. The second most common mistake is closely related to the first: many first-time real estate investors don’t know the local market statistics as well as they should. They should know what rents go for in each neighborhood, what the expectations of renters and buyers are for a home, and what the long-term market analysis looks like for each neighborhood. Knowing the market is often the key to success for investors, without it they are taking risks that are needless.
3. The next most common mistake involves the lack of a plan on the investors part. Those just entering the game of real estate investing don’t have a lot of experience, so they often lack a specific goal or plan, and they can easily get de-railed, or flip-flop when they are in the middle of a project. It’s important to have the research, the understanding of the numbers and the market, and a clear plan based on that research.
4. Many first-time investors end up overspending on items that don’t add real value to the project, or that they will never get a high enough return-on-investment to make those expenditures worthwhile. This goes back to #2, you really have to do the research and know what the market is like for each project.
5. The fifth most common mistake is related to all the above…most first-time real estate investors don’t look for help. They may read a book or take a class, but often this leads to a fatal mistake: confusing factual knowledge for experiential wisdom. As with any new venture, getting help from veterans in the industry will save a lot of trouble and heartache.
The original article is a collection of the top three tips from 26 different real estate professionals, compiled by Robbie Richards, of Jacob Grant Property Management. Be sure to read the article for a thorough explanation of each of the top mistakes, if you are interested in real estate investing.