7 Mistakes Real Estate Investors Should Avoid When Buying An Investment Property

Undoubtedly, real estate is one of the most popular and safe ways to invest your hard-earned money. With a constant demand for good housing options, buying an investment property can definitely rake in good returns on investments for you. Having said that, it is important to know the most common, as well as the biggest investment mistakes that real estate investors tend to make while buying a property. Not only will being informed about these mistakes help you make the right decisions, but also save you from possible financial losses.

Real Estate Investing Mistakes One Should Avoid

Here are 7 mistakes real estate investors make while buying an investment property.

• Not Doing Thorough Research

Although a simple one to avoid, this mistake is often made by a first-time real estate investor. Conducting thorough research on the desired locations, knowing the prevailing property rates in those locations, the land value, civic amenities, nearby facilities, average rental income that can be earned in the shortlisted location/s, and analyzing the property market conditions are a must before investing in a property. Without proper knowledge of the location, you might end up getting deceived by brokers and agents.

• Doing Everything On Your Own

Buying an investment property entails a lot of work – from inspecting the property to getting the paperwork in order, and everything in between. Many buyers think that they can do it all on their own and that’s where they go wrong. The mammoth task of investing in real estate can be easier if you trust experts and divide your work among them. By getting help from home inspectors, handymen, insurance representatives, professional property managers and attorneys, you can avoid some of the biggest investment mistakes that might come back to haunt you years later.

• Not Considering Operating Expenses

Not considering or underestimating operating expenses is one of the common real estate investing mistakes that buyers make. These expenses may include:

• Getting the property painted once every few years
• Marketing and advertising expenses for when your property is vacant
• Miscellaneous repairs and maintenance
• Pest control fees
• Tenant screening fees
• Insurance
• HOA fees wherever applicable
• Utilities
• Trash removal fees
• Property taxes

When considering a real estate property to invest in, ensure that you factor in all these expenses before committing.

• Overpaying

A mistake that is often made while buying an investment property is paying more than what it is worth. By overextending yourself, you might end up taking on a lot of debt. As a result of this, it might take years for you to reach the break-even point and start earning returns on your investment. Instead, try searching for properties in the locality of your choice that won’t burn a hole in your pocket.

• Not Having An Investment Strategy

A rookie mistake a first-time real estate investor can make is not having a well thought out investment strategy. Ideally, you should first identify the types of property you want to invest in – residential or commercial. Only after weighing the pros and cons of residential vs. commercial real estate and the long-term implications of both should you make the decision and go ahead with your investment. 

• Not Considering Residents’ Needs

Wondering which investor is making a common investment mistake? The one that intends to use an investment property for vacation rentals but the property it’s near any popular vacation spots like beaches, mountains, or local tourist attractions! When you buy an investment property with the aim of renting it out, you need to keep in mind who your residents are going to be. For example, if you want to rent your property to college students or young couples, your property should have quick access to public transport and should probably have a vibrant nightlife scene nearby. Similarly, family-centric rental properties should be close to schools, supermarkets and hospitals.

• Putting All Your Eggs In One Basket

When buying an investment property, don’t invest all your money in one property; it is always a good idea to spread out your money and gain better results. Here are some advantages of having multiple rental properties:

• Risk diversification
• Tax benefits
• Provides passive income even during your retirement
• Higher long-term ROI
• Investment portfolio diversification

Maximize Your Investment With Professional Property Management From BFPM

From finding the right investment properties that suit your requirements, to actually managing these properties so that you can focus on what’s important to you, we at Beach Front Property Management have your covered. To get started, feel free to schedule a 15-minute consultation call with us.