#3 Mistakes New Investors Make in Real Estate and How to Avoid Them.

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.

YOU LIKE THIS ARTICLE? FOLLOW US ON TWITTER @halalrealestate or Click our facebook like button on this blog.