Top Mistakes for Real Estate Investors to Avoid
Real estate is a popular first investment for new investors. While it is true that the real estate market is a good opportunity to make money, it’s not as simple as buying a house. Making an effective investment takes skill and strategic decision-making using knowledge of the market. Thinking that you can jump right into real estate with little preparation can be financially devastating. There are many common mistakes that first-time investors make that can cost you thousands of dollars. Avoiding these pitfalls will help you make an informed investment:
Not Having a Plan
One of the worst things you can do is purchase a property without a fully developed plan. Simply owning a property isn’t necessarily going to make you money — you need to consider what you’re going to do with the property and what kind of property is best for you. Even if the market is hot, never rush into a purchase.
Instead of building a plan around a property, create a plan first and find a property that fits. What kind of investment are you going to make? Will you keep the property long term and rent it out, develop new land, or flip a property? What type of property is best for you: a single-family home, a multi-family home, an apartment complex, a commercial office? There are pros and cons to each of these types that you should be familiar with.
Where is a good location for a real estate investment? Do you need to be in close physical proximity to the property? Do substantial research on the local real estate market for any locations you’re considering. Think about city-wide and state-wide growth and development as well as any other changes that could occur in the near or distant future. For example: How could climate change impact a coastal property’s value in 10 years? Are there nearby sites where long-term construction could occur? Why is the property owner selling?
Questions and considerations like these are the foundation of a well-developed investment plan. The bottom line is that you should know exactly why and how the property is going to turn a profit before you buy it. If you’re struggling with finding a direction or you want to make sure your plan is thorough, consult a real estate expert.
Part of creating an investment plan means calculating income versus expenses on any property you’re looking at. When it’s time to run the numbers, inexperienced investors often miss or underestimate key expenses. This includes things like yard upkeep, appliance repair and replacement, insurance, property taxes, realtor costs, and unexpected damages. Work with a consultant or someone who has owned a similar property to ensure your expense estimates are accurate.
Not Having a Team
Another common mistake for first-time investors is trying to do everything on your own. One of the best ways to ensure your success is to surround yourself with experts and resources. In addition to consulting with multiple people before purchasing a property, it’s a good idea to know a trustworthy home inspector, real estate agent, a handyman or repair company, an attorney, an insurance representative, and a property manager. Having a strong team on your side will minimize your costs, strengthen your decisions, and you won’t be left high and dry in a difficult situation.
Ignoring Tenants’ Needs
When it comes to rental properties, it’s important to take care of your tenants and make your property as attractive and comfortable as possible. Identify key amenities that will make your property more desirable to your target audience. Raising the demand and desire of your property will help it rent fast and stay rented. Additionally, you want to build a reputation as a landlord who treats tenants well and encourage renters to renew their lease. An empty rental property is nothing more than a cash drain.
This is where working with a strong property management company becomes essential. A property manager can help you identify the amenities your property needs and will manage the personal relationship with tenants on a day-to-day basis. Above all, listening to the concerns and recommendations of tenants is extremely important. Instead of hiring any run-of-the-mill property manager that does the bare minimum, work with an experienced company like Utopia management. We go above and beyond to offer the best experience for both tenants and landlords, with perks like intuitive online systems for rent payment and management and advanced insight into marketing and property optimization.