When it comes to investing, making mistakes hurts more than your ego. It also impacts your wallet. Many real estate mistakes can be avoided and in this article we take a closer look at some of the best ways to avoid investment blunders.
Real Estate Mistake Number One – “I’m Going to Get Rich Quick!”
The vast majority of the time real estate investors who approach investing with a “get rich quick” mentality will discover that they are indeed in for a shock. Real estate investing can make you rich, but it won’t happen overnight. As you likely already know, approaching real estate with a get rich mindset will likely only lead to depression and failure.
Real Estate Mistake Number Two – Falling in Love
Even the most seasoned of investors can fall in love with an investment. In the realm of real estate, a given property might have a personal appeal for even the most seasoned investor. In this fact resides the problem.
Never lose sight of the fact that you are investing to make money, and that means your emotions regarding a property should not be a factor. Usually investors realize this on a conscious level. But they can be swayed subconsciously by their admiration of a property. Always step back and be cold and calculating regarding any real estate investment. Triple check the numbers and always ask yourself, “Does this investment make financial sense or am I being biased by my personal preferences?”
Real Estate Mistake Number Three – Too Many or Too Few Properties
Another major problem that many real estate investors encounter is either having too many or too few investment properties. You need to access what you can handle and stay within that zone. Having too many properties to manage is more than just headache. It also comes with considerable financial risk.
The flip side of the coin is having too few properties. If you don’t have an investment property in development, then you may find a disruption in your finances. Having multiple real estate properties in development means you also have funds coming your way. This works to your benefit if a particular real estate investment turns out to be less lucrative than you may have hoped.
Real Estate Mistake Number Four – You Underestimate Cost and/or Renovation Time
If you are renovating a property, be prepared to have cost overruns. You may also experience time overruns as well. You may work like a well-oiled machine, but that doesn’t mean your contractors will. Always budget extra money and time into any project, and never make an exception to this rule.
Real Estate Mistake Number Five – Making the Mistake of Thinking Your Previous Investment Experiences Translate to Real Estate
Are you a great tennis player? How about golf? Just because you can play tennis doesn’t mean you’ll instantly be a great golfer! The same holds true for investing in real estate. Real estate is it’s own “game,” and it has its own rules. Success in other areas of investing or your career does not mean you can jump right in and become an instant real estate tycoon. Stop and learn the “lay of the land” before digging in too deep. Otherwise, you can dig yourself a hole in the process.
In the end, there exists no replacement for experience and performing one’s due diligence. The five mistakes we’ve outlined here are ones that even seasoned real estate investors can make.