Top Ten Mistakes
Real Estate Investors Make
Not performing due diligence: Examine the market and what acquisitions will best meet your objectives. Look at rents, trends, vacancies, new construction, and permit applications. Once you place a contract on a proeprty, you need to prepare a checklist of due diligence items that must be addressed regarding the physical attributes of the acquisition from environmental inspections to zoning, from utility capacity to access. Hire a competent professional to examine the mechancials, the roof, building components, etc., including future road plans. Are there utility assessments?
Falling in love with the property: Do not ignore facts in favor of emotion. Does the price justify the rent? Do the math. Keep emotions out of your income property purchases. Prepare a financial analysis.
Underestimating time and costs for improvements and upkeep: Both might cost more and take more time than you think. Do not let your desire to own the property sway the cost estimates to make the deal look better just so you can justify your purchase decision.
Thinking you will get mortgage rates that are advertised on TV and the Internet: Interest rates for investment properties are generally higher and the amortization periods shorter. Estimate 20 to 25 years for the amortization period.
Buying price over location: Do not buy a lower priced investment in a lesser location. You will be better off with the superior location rather than the lower price...location, location, location. The better location will have a lower vacancy factor and better appreciation for resale values and rents.
Not preparing for a worst case scenario: If you can sleep with the worst case scenarios, then the deal is okay. Otherwise, you are better off without the deal.
Not examining alternatives: What else can you do with the money? Make sure you are choosing an investment in accordance with your long term objectives and your risk tolerance.
Not preparing an exit strategy: How will you sell or exit this investment? Plan the time of your exit.
Following the crowd: There tends to be a "herd mentality" in investing. Buy with logic, not emotion.
Over leveraging: Leave some credit available for emergencies. Put enough cash down so you are comfortable with the leverage.
Worthit Realty, LLC, is a full service, licensed real estate brokerage specializing in residential property management and can assist you when selecting or selling investment property. We invite you to accept our FREE, NO OBLIGATION CONSULTATION to discuss your residential real estate investment portfolio.