Don’t Make These Mistakes When Investing In Real Estate
A lot of people want to jump straight into the property market and snap up a bargain. But parting with large sums of money in a short amount of time probably isn’t a good idea. Real estate is a massive investment. And if you make a mistake, it’ll come back to haunt you for years to come. Here are some of the mistakes that newbies make when they first dip their toes into the market.
Failing To Understand What You Can Afford
Buying a property is very different from renting one. You’re not just paying the sticker price of the mortgage. You’re also funding all the servicing, maintenance and upgrades that you need to do on the building. And that invariably turns out to be much more expensive.
The general rule of thumb is to double the mortgage to get a sense of how much it will cost you to run the property in reality. Doubling might sound conservative, but don’t underestimate all the upkeep that you may have to do, especially if you rent out to tenants.
Failing To Get A Proper Survey
A lot of new buyers will eyeball an investment property, see no obvious problems, and then part with their cash. But, of course, issues with real estate are often invisible to the untrained eye. It is hard to tell whether a hairline crack in a supporting wall is a problem or not.
Belasco Associates, a London-based property firm, suggests that investors hire professionals to provide a comprehensive report on the state of the property. Getting one of these radically reduces the risk that you face, and provides you with recourse, should you incur building-related costs in the future.
Failing To Shop Around
Just like any other market, the property market isn’t perfect. Information doesn’t flow freely to all buyers and sellers. And so prices can float about all over the place in the short-run.
Your job as an investor is to examine the market as a whole, look for opportunities, and then capitalise on them.
Seasoned property investing professionals know that there is about 20 percent of the market who are looking to sell FAST. These people, therefore, are often willing to accept significant discounts on their homes, if it means that they can shift them and get money in their account.
A Lack Of Vision
Amateur property investors will often take one look at a property, see that it is run down and reject it. But this isn’t usually a good idea. Even if a property looks terrible, that doesn’t mean that it is a bad investment. Many sellers will offer massive discounts on dilapidated real estate. But often you only need to spend a small sum of money to bring them up to standard. And when you do, they can thrive.
While some gurus will tell you that making mistakes as a property investor is par for the course, it doesn’t have to be. So long as you take the right approach, you can avoid all kinds of issues.