“6 Costly Real Estate Investing Mistakes to Avoid” is our tenth in a series of blog posts on real estate investing. To read more, download our entire eBook, “The Real Estate Investor’s Checklist.”
Real estate investing is not as easy as it seems. First time investors, in particular, have to be very cautious not to make too many mistakes.
Even experienced investors make mistakes, such as market timing. Waiting and analyzing forever can result in losing the best deals.
Here are some of the most common real estate investing mistakes than can be quite costly.
Bad financing is one of the worst mistakes possible. Typically, bad financing includes a combination of the following: High interest rate, adjustable interest rate, high monthly payments, balloon payments, and personal recourse.
Misjudging Resale or Rent Value
The number one job of an investor is to understand how the end customers (renters and buyers) make purchasing decisions, and then translate that knowledge into value.
If you fail to do your homework, you will have hard time making investments that earn a profit.
Underestimating Repair Costs
First time investors have little idea how much it costs to renovate a property. They take advice from a home inspector or real estate agent who may just throw out a generic number. Always do a lot of homework and be very conservative in your budget estimates.
Underestimating Renovation Time
Additionally, inexperienced investors are often overly optimistic when it comes to renovation timelines. They think it can be done in 30 days, or 60 days. More often than not, things can go wrong. As is the case with repair costs, it is better to be very conservative in your renovation timeline estimates.
Underestimating Maintenance Costs
General property maintenance can cost a lot of money, which eats into your profits. Roofs, HVAC systems, wiring, siding, appliances, and flooring can cost thousands of dollars. Be extra careful estimating the maintenance costs of older properties in particular.
One of the fastest ways to lose money is having bad tenants. Always check with your insurance policy and to see if it covers tenant damage. If you have a mortgage, you also want to be sure you have tenants that pay on time. Finally, know your rights and responsibilities as a property owner, as some states are more generous toward renters than owners.
Stay tuned for our next blog post covering 5 more costly real estate investing mistakes to avoid, or download our entire eBook, “The Real Estate Investor’s Checklist.”