7 of the Most Common Mistakes Made By Beginner Real Estate Investors Don't fall into these seven common pitfalls of the real estate sector.
By Xavier PRETERIT Edited by Chelsea Brown
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Real estate is one of the safest ways to create lasting wealth, and it is attracting more and more people each year. Investing in real estate is an exciting and lucrative adventure, provided that you don't fall into the pitfalls of the sector. The lack of experience of beginner investors can cause them to fall for many tricks. So, here are seven common mistakes to avoid at all costs if you're a beginner who wants to succeed in the real estate industry:
1. Thinking that you will get rich quickly
One of the major mistakes beginner real estate investors make is that they often think that the results will be tangible quickly. That is the outcome of the internet phenomenon: The public wants everything right away and without making any effort. Many industry gurus focus their communication in this direction, and they do not show that in order to succeed, it is necessary to have a spirit of self-sacrifice and also to work hard. In reality, patience and perseverance are required in this type of investment. Just searching for a profitable property can take several months if you don't have a keen eye. Moreover, rushing into an investment without checking the property in question is often a bad omen.
Related: A Beginner's Guide to the 5 Easiest Ways to Become a Real Estate Investor
2. Not having a strategy
Some real estate investors prefer to take projects one day at a time, without having a precise plan of action. In this case, the risk is to end up with several properties which do not correspond to their profile. These investors embark on all sorts of projects without measuring the consequences, and they often find themselves ruined because of their poor investment choices. Having a well-defined strategy allows you to go in a precise direction. Following a strategy means ensuring that you don't venture out in all directions and that you move in the right direction.
3. Focusing your research on a specific city
Another major mistake often made by beginner investors is focusing on a specific city — often close to their home or in a particular city because they have been told that its profitability is good. In reality, this way of searching drastically reduces the opportunities since these investors will feel obliged to buy a property in that city, even if the profitability is not there. On the contrary, it is necessary to expand the search in order to not miss any opportunities. It is easy to optimize the profitability of a property that is already profitable beforehand. On the other hand, a property that is not profitable will harm your project, even if you set up some optimization strategies.
4. Omitting the negotiation stage
In real estate, negotiation is a key step that takes place at different levels. In particular, it intervenes at the time of purchase of the property. Many real estate investors forget that a good deal is made at the time of purchase. If they buy at a too high price, that will impact the profitability of their project, whether it is a rental or a resale project. The purchase price constitutes an important variable in a real estate investment project. Keep in mind that if you don't get a good deal at the time of the purchase, it is very likely that you won't get a good deal on the resale.
Related: How to Avoid the Common Pitfalls of Real Estate Investing
5. Underestimating the cost and the scope of the work
It is important to seek the help of professionals when you are tackling work related to real estate because costs can quickly become overwhelming. Often, beginner investors have no idea of the scope of the work to be done, and therefore they underestimate their costs. They only have a global or a partial vision of what they want to achieve, and they do not realize that the work can be much more consequent.
6. Not checking the condition of the property
Even if virtual visits are at the present time facilitated by technology, seeing the condition of a property in person allows you to check if it corresponds to your expectations. There is no point that can be neglected at this stage. It is particularly necessary to check the state of the common parts as well as the state of the roof, for example, with the help of a drone in order to be more precise. While visiting a property, it is also important to check the condition of the neighborhood. All this is done in order to avoid very high costs of work.
7. Thinking that you can handle everything yourself
In the real estate field, beginner investors tend to think that they can handle everything, either to make a bigger profit or simply because they find it difficult to delegate some of their work. This is a common mistake, as the time spent in the management of a property is valuable time that they can allocate to tasks that are more within their reach, such as searching for other properties or finding some solutions to optimize the profitability of a property they possess. In some cases, delegating this responsibility to professionals is a better solution. But be careful, delegating does not mean not controlling. It is necessary to think of always monitoring the state of the work.
Related: Master These 6 Skills to Succeed as a Real Estate Investor
If you're just getting started in real estate investing, use these tips to avoid common mistakes. Remember this: It takes time to see results, don't go in without a strategy, don't limit your search, don't skip the negotiation stage, don't underestimate the cost or the work, thoroughly check the condition of the property, and don't hesitate to delegate the work.
