It’s on TV so it must be true, right? Well, that’s where you’re wrong. These TV shows make it seem like being a real estate investor is an easy process with little to no headaches. What they don’t tell you, or show you, are these exact headaches that you’ll have to go through if you start investing in real estate. The whole process of invest, renovate, sell is pretty lucrative and if done right can net you some big income.
Going back to these “headaches” these shows don’t show you. Take tiling for example. If you go to replace tile in the bathroom these shows only discuss the cost of the tile – not the other necessities like grout, adhesive, sponges, and YOUR time.
Top 5 Real Estate Investing Mistakes You Should Avoid
You shouldn’t let these shows scare you out of investing in real estate, at any age. Sure they may not fully disclose the true cost of what it takes or took for the remodel but they do cover some of the things you should look for. In the end, it comes down to doing your own research and inspections.
1. Never Forget to Have a Home Inspection Done Prior to the Purchase
You’re probably smacking your head against a table right now wondering how, or why, anyone can buy a house without a proper inspection. Let us tell you, this happens all the time and almost every day. People get so rushed in the process and just want the dream house, letting emotions rule their money, or even just pass up the inspection to close the deal faster due to pressure of sale. A proper home inspection can reveal many issues with the house that you’ll have to cover in the renovations. The best part – you may be able to use some of these issues to either lower the price of the house or get the seller to cover some of the fixes pre-sale.
2. Always Vet the Deal and Run the Numbers
One of the most common mistakes investors make is when they don’t properly run the numbers and verify the property will be a good investment. Not every property is a good investment. At a minimum you should calculate the mortgage payments, taxes, insurance, repair costs upfront, maintenance costs, and any other expense you’ll have to incur and compare it to the market rent rate or house prices.
3. Properly Screen Your Tenants
Many real estate investors buy property to turn into rental units. If you’re planning to do this you’ll need to have a good process to screen your tenants. It’s really difficult to spot a “good” tenant since bad renters won’t tell you their problems upfront. You should run credit checks, background checks, and watch for any red flags that can mean you have a problem. In some cases you can have them submit referrals and follow up on those referrals.
4. Don’t Deplete Your Savings
You should always be setting aside money into your savings for unexpected repairs. You should also never deplete your savings to make a purchase. It’s important to have cash on hand to pay for big expenses. Even if you’re recently renovated a property you will still need to keep an emergency fund available for when things happen, because they do. Most landlords try to set aside 10-20% of the yearly rent for an emergency fund.
5. Search For the Right Advice
Everyone has opinions. Everyone has ideas. You shouldn’t let them cloud yours. Your best place for advice is yourself and your gut feeling. It may sound a bit cliché but it’s true. People are naturally more willing to give their own bias advice or opinion and it may not be the best option or path for you. Always do your own research and reach out to experience investors ahead of time for more info.