Do you want to make enough money out of real estate so that
within a few years’ time you’ll be able to pay off your own home, buy a boat,
or retire?
If
you answered in the affirmative, I’ve got disappointing news for you: it’s not likely to happen
Real
estate investing is a long term strategy for making money.
Long
term doesn’t mean 12 months – it could mean
12 years, or 20, or 30.
It’s about doing something now to create wealth for later
Quick
profit from real estate is not the norm, and if that’s your plan then you’re on
the right track for some big disappointments.
The
reason I’m saying this is because new investors need to be realistic about
their end-game.
It’s
critical for those taking on their first property to understand the bigger
picture of investment.
That
includes the ups and downs, the wins and the losses, and keeping an eye on the
ultimate objective you are working towards.
Your
objective might be to retire at 50; to be a self-funded stay-at-home parent; to
finance a business venture; or to help your kids into their own home.
Your
objective is personal and needs to be clear and defined.
Why is all this so important?
Because
you’ll hit a lot of speedbumps along the way, so it’s important to remember the
‘why’ when things might not be going smoothly.
Perils
and pitfalls are common in the property market (let’s not forget, there is
plenty of success to be had too!) and it’s usually those investors who aren’t
clear on their goals who are the first to panic and sell.
When
investors give up after their first hurdle, they essentially become so
discouraged that they change their end game, because they think what they’re
trying to achieve is impossible.
I’ve
seen investors with a solid plan who never move past one property, and I’ve
seen others sell their single property investment out of fear.
These
three mistakes seem to be responsible for some of the most common hurdles that
new investors run into:
1. Failing to do your homework
The
number one, absolute rule about property purchasing is to do your homework
first.
Would
you buy a new car without checking the specs, reading reviews, taking it for a
test drive, running a VIN check, working out the expenses and finances, and
looking at a whole variety of models first?
Of
course not – and the same principles apply to property.
Not
researching every aspect of the investment and (and generally will) cost you in
the long run.
There
is no such thing as a silly question when it comes to purchasing property.
Grill
the property manager or real estate agent and research the neighbourhood.
Is
the rental value of the area increasing and are vacancy rates tight?
Does
it tick all the boxes for location?
What’s
the anticipated future growth for the area?
Always
calculate any expenses related to repairs or renovations.
Don’t
be disappointed if finding the right property takes a while.
It’s
better to wait for the right one than to dive in on a ‘maybe’ property with
your fingers crossed.
And
if you do buy a lemon, talk to your expert team about a devising new strategy –
there are several options for dealing with a poor investment.
Giving
up is not one of them.
2. Forgetting to consult the experts
The
best thing about having an expert a phone call away is that they can see you
through all the ups and downs.
They
are your all-important A-team for guiding you through the research process and
helping you make wise investment decisions.
Just
as importantly, they are there to help you navigate your way forward when you
are feeling out of your depth.
You’ll
likely need a trustworthy and knowledgeable financial adviser, a real estate
guru or buyer’s advocate, and a non-affiliated mortgage broker.
You
may want to steer clear of brokers who align with a particular lender – their
advice will probably be skewed towards their kickback, and that may not be the
best deal for you.
Make
sure your team are true experts with experience and they will be able to help
you avoid common investing and finance mistakes.
They’ve
seen the real estate market and the economy shift dynamically and can advise
you on new strategies.
Sure
I’m biased, but I think you’re foolish if you don’t get a buyer’s agent on your
team.
3. Giving up when the money flows out more than it flows in
This
is probably the biggest mistake I see inexperienced property investors make.
Property
investing doesn’t come with a foolproof guarantee of success – and sometimes,
the unexpected happens.
The
lesson is to overestimate, rather than underestimate, the expenses of your
investment.
Building
a buffer into your finances will give you wiggle room when the unexpected
occurs – whether it’s a vacancy period, an air-con unit that needs replacing or
myriad other issues that can crop up when you’re a landlord.
What
if the garage door breaks, the oven catches fire, or the patio roof falls down?
Alternatively,
you might find yourself owning property in a rental market that suddenly dips,
forcing to carry more of the financial weight of the property than you
expected, until the market evens out again.
When
investors are forced to find another $50 or $100 a week to hold their property,
it can cause them to fret that their investment is costing them more than its
making them, which makes them want to jump ship.
The
reality is, every property investor– even the most successful ones – face these
types of setbacks.
All
of these situations are within the parameters of normalcy for property
investing.
Remember,
it’s better to be on the field than on the sidelines.
Far
too many investors quit before they’ve given it a real shot, which is the only
way to guarantee you’ll never make money through property.
Don’t
let fear or discouragement keep you from the strong financial future you
desire.
This
article is written by David Yardney,a professional real estate guru. We follow
up on real estate news and updates around the globe.
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