Real estate investments seem to be a reliable way of making money in these tough economic times. However, there are number of traps to be wary of in order to protect your investments.
1. Insufficient Research
Often an investor will fail because they purchase the best home on a street that is in an unsuitable location, or in an area that’s run down due to the economic times. It’s important to do your research and choose a wonderful property that’s in a desirable spot. To be able to recognize the flow of your investment, check the listings over the past ten years. This will give you an idea if the market is depressed or if the costs are on the rise. Run a list of the comparables in the area you’re thinking of purchasing also and see how they have fared. For an expert opinion, think about hiring a professional estate agent to help you with the process.
2. Exceeding What You Can Afford
The primary goal of investing is to spend only what you have figured within your budget. Make sure you know your limits and try not to get caught up in the enthusiasm of the projects at hand. Real estate is a long-term investment and you won’t reap the rewards immediately. It takes time for your property values to rise and for them to generate sufficient money. You will also need to factor in any necessary improvements and renovations. When it comes time for making home improvements, be conservative and choose only the projects that will add value to your property first.
3. Not Having an Emergency Plan
An investor can fail in the real estate market if they don’t have an emergency plan ready in case something goes wrong. Today’s economic climate is tough to figure out, so you need to have an emergency plan figured out for a quick evacuation. Be prepared for the unexpected and have a professional expert handy in case you need to get rid of your investment quickly.
4. Don’t Be Impatient
Unlike other ventures, investment property is a long-term project that you’ll probably make money on once you resell. Plan ahead for renovations and general upkeep and expect these projects to set you back financially at the beginning. It may even be a struggle to meet your mortgage payments on the property at times. Depending on a quick sale will only set you up for financial disaster.
5. Getting Emotionally Attached to the Aesthetics of the Property
This is a major area where investors struggle. They could get emotionally attached to a specific feature or room of the house and fall in love with the investment. It’s definitely a plus to like the home that you are purchasing, but you have to remember that you aren’t going to be living in it. Clear your mind and see the property for its imperfections and the costs that you will have to incur to fix it up. You may love it for its quirkiness and charm, but you need to make sure that you can still rent it out.
Andrew Potter is the resident property blogger for www.myonlineestateagent.com. My Online Estate Agent partners with the leading property websites, providing an unbeatable service for landlords and sellers.