Six Things Investors Should Avoid to Be Successful in Real Estate


Becoming a home investor means adapting strategies and gaining a deep understanding of the local market. Each area is different from the next, and one set of challenges might not even be a big deal in another area. How does a new investor know what to do and what not to do? We talk about six of the top things a venture capitalist wants to dodge to become a thriving investor in this blog.

Failing to Plan and Research

This section refers to the market, the house, potential buyers, inspections, repairs, and every other aspect of securing a property and managing it. Gaining knowledge gives the owner insight into things like whether the property has issues with drainage, why the person wants to sell in the first place, whether there are economic problems in the community like a lack of work, and if the there are foundation issues. Knowing what needs fixing and how much money the property will likely take to get it ready to put up for sale are important. Before signing on the dotted line, expert investors suggest finalizing an action plan and working from it to get the best results.

Buying the First Property on the List

Most people take the time to research a vehicle or pet before getting their first one. The same principle should go with house hunting. As an investor, it is necessary to look at several properties. Then, creating a pros and cons list for each one can help narrow down the selection. If a person just looks at one house before buying, then there is no way to know if the property makes the most financial sense. To be a successful investor takes a ton of work and note-taking to make sure one picks the best property.

Thinking that Owning Real Estate is a Way to Get Rich Fast

Many people watch the DIY and house flipping shows on television and think that it is a better way to get rich than working a regular job. Some may think they can do investing as a part-time job, but the pay may be higher with full focus on the project. There are tons of hours that go into rehabbing a house and getting it ready to go on the market. Even then, a house can sit for months waiting for the right renter or buyer. Sometimes, investors barely break even. If a renovation uncovers termites or structural issues, then the budget can go out the window. It may take several investments to get ahead or begin building a financial cushion. Investors must always have other ideas or a way to cover things financially until the profits come in.

Not Negotiating Loans

New borrowers may feel they have to take what the bank or lender offers when securing funds for a property. The truth is, investors can negotiate the terms of the contract. Whether the goal is to get payments to a more affordable level or to pay off the loan in a particular time frame, lenders are willing to work with the right credit or collateral.

Lack of Alternative Plans

One of the biggest mistakes investors make is to quit paying attention to the loan after securing it. If rates go up, then it is possible to refinance to get a better payment structure. An important piece of advice is to make sure there is enough wiggle room to pay a higher monthly payment should interest rates change.

Choosing Renters by Popularity

Renting an investment property does not mean the owner must like the people who want to rent out the building. In fact, many people get themselves into a tight spot by trying to lease out properties to those whom they connect with emotionally. While it is good to know the basic information about renters, it is important to keep some distance so that investors can deal with non-compliant tenants and people who damage the property. It is much easier to evict a tenant when it is not a family member or close friend. If an owner goes to court, then being neutral can help them avoid caving to unnecessary concessions.

Raising the rent every year can scare off tenants, so investors should choose a predictable schedule and give as much advance notice as possible to keep properties full. If one takes on a partner, then due diligence is extremely important to ensure both parties are happy and the team thrives. Another important tip is to write a list of expenses for the house or business. Knowing the overhead up front is crucial to planning a budget for the property. Staying clear of these mistakes can help investors create a thriving and profitable brand.

Contact a realtor if you're looking at buying an investment property.

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