Investing in real estate can be an immensely profitable venture – provided, of course, you know what you’re doing. Unfortunately, far too many fledgling investors make an assortment of damaging mistakes that turn their freshman investments into financial busts. While it’s true that success is never a guarantee when it comes to real estate, there are a number of ways new investors can effectively decrease their odds of messing up their first investments. So, if a profitable investment property is what you seek, take care to avoid the following pratfalls.
Refusing to Consult Experts
You’d be hard-pressed to find an area of investment in which you wouldn’t benefit from the guidance of seasoned experts – and real estate is far from an exception. So, if you’re about to purchase your first investment property, you’d be wise to get in touch with experienced professionals posthaste. Needless to say, having friends, family members or general acquaintances with real estate experience can prove exceedingly helpful in this endeavor. Having a familiar face show you the ropes and educate you on the ins and outs of real estate investment can be a boon to your odds of success.
Of course, not all first-time investors are acquainted with people who have real estate experience under their belts. And should you count yourself among them, it’s recommended that you get in touch with a highly-rated real estate investment company. Knowledgeable professionals will be able to teach you all about the tenets of smart investing and bring you up to speed on core, core plus, value-add, and opportunistic real estate investments.
Failing to Research Local Property Values
When seeking out your first investment property, it is imperative that you engage in proper location research. Given how important location is to any real estate investment, this is one area where you simply can’t afford to phone things in. Furthermore, one of the most vital steps to take when carrying out your research is looking into local property values and rental rates.
For starters, getting a feel for property values and rent prices will provide you with an understanding of how much you can expect to spend on a decent rental and how much money said rental is likely to make you each month. The knowledge you acquire can also prevent you from overpaying for your first investment property. For instance, if you notice that local properties that are similar to one you want to purchase have much lower price tags, don’t hesitate to request an explanation from the seller. Some sellers bank on prospective buyers failing to do their research, and the last thing you want to do is reward their dishonesty.
Forgoing Pre-Purchase Inspections
Forgoing a pre-purchase inspection from a certified professional is unlikely to work out in your favor. Considering how much money is at stake with such an investment, it’s only fitting that you’d want to know exactly what your resources will be going towards. Being fully aware of any outstanding issues an investment property has before committing to buy can help prevent you from making a woefully misguided financial decision.
So, even if you’ve already conducted a detailed personal walkthrough and are pleased with what you’ve seen, a pre-purchase inspection should still take place. Additionally, if a seller is staunchly opposed to an inspection, this should be taken as a sign that they’re afraid of certain problems being brought to light. Furthermore, having a property insured may prove impossible in the absence of a professional inspection.
An inspection from a certified professional can also prove helpful in determining how large an offer you should make on a property. For example, if the results of an inspection reveal the presence of large-scale issues, the cost of addressing said issues should factor into your offer.
Although real estate is typically regarded as a profitable area of investment, it’s important to understand that success is by no means guaranteed. Unfortunately, a staggering number of first-time investors enter the fray believing that massive returns are a given and wind up deeply disappointed and financially depleted as a result. Fledgling investors looking to reduce their odds of failure and set the stage for lasting success would do well to steer clear of the problems outlined above.