Quantitative finance collector
C++ Matlab VBA/Excel Java Mathematica R/Splus Net Code Site Other
May 23

5 common mistakes real estate investors make

Posted by at 11:58 | Default | Comments(0) | Reads(1135)

Today’s real estate market is incredibly active. This means that bids are getting more competitive with every day that goes by. That being said, it is common for investors to make mistakes and purchase assets that are above market value. Whether you’re new to this business or you have years of experience, it is important to learn how to avoid these following 5 common blunders. Otherwise, you risk spending a lot of money on a property that will never bring you returns.
Open in new window

1.  Start an investment without a well-established plan
Many real estate investors start spending money on property without adhering to a plan first. Basically, they purchase a type of property without getting informed. They go with the premise that the deal is fine if the property “looks good”. But what if what you see is not what you get? Have you ever thought about that? A thorough investment strategy will help you remain focused on your goals. Don’t cut things short because of lack of time and additional constraints. Evaluate existing collateral by performing an adequate level of due diligence.

2.  Get emotional
Believe it or not, some investors can be particularly emotional when investing in property.  The process is different from buying a house and be a home owner. It’s really important that you detach yourself from feelings that might get in the way of the purchase. Stick to basic principles and adhere to the formula that can bring you a return on your investment. This is the goal you should be chasing after. Settle on a budget and don’t exceed it. Have the nerve to say “no” in case you happen to be dealing with a bidding war. If the price goes beyond your budget, walk away! It’s the smart thing to do.

Open in new window

3.  Fail to do their homework
There are tried and proven strategies meant to help investors build wealth. However, it is important that you do your homework before spending any money. Real estate investing is not rocket science, although in order for someone to see returns they must get informed first.  A lot of want-to-be investors are not qualified to buy property; and yet they act like they know it all. Before jumping into an industry where you know very little about you should check local market trends. Read a few related books, or better yet assess blogs and official real estate websites to stay updated with the latest changes.

4.  Underestimating tax consequences
Real estate investors can build wealth with property investment providing that they do things by the book. It is equally important that you understand how to capitalize on tax reimbursements. This way you expand your income stream; if you don’t know much about the implications of capital gains now it would the best time to get more informed. Don’t ignore the buzzword of the industry, which are “location, location, location”. The key to witnessing high returns from property investment is timing. The process is cyclical, and having a clear idea of taxes will help you get one step closer to your goal. Never stop learning and spend as much time as possible understanding basic terms like absorption rates, inventory levels, appreciation percentages, days on market and so on.

5.   Ignoring annual financial analyses
You can’t afford to play with money when dealing with real estate investments. It’s a business and for it to render returns it must be well-taken care of. As a business owner, you must review your financials every couple of months, or at least annually. Have a property manager give you statements of expenditures and receipts; also, you might want to consider performing an annual market appraisal just to have an idea of how your investment is performing.  

Open in new window

Some mistakes that investors make when buying property are common; others are unacceptable. If you want to see returns on your investment, you have to do your due diligence. Whether you want to buy property in Miami or buy villas in Turkey, the rules are the same. Get to know the market first, assess risks and always get advice from a financial advisor. This way you remain on the safe side and you avoid unnecessary risks that can cost you incredible amounts if you’re not being careful.   


Add a comment
Emots
Enable HTML
Enable UBB
Enable Emots
Hidden
Remember
Nickname   Password   Optional
Site URI   Email   [Register]