With a quick Google search, a novice real estate investor can find an overwhelming amount of information on how to become successful. There are promises of quick wealth, of fail proof methods, and books and seminars full of information on how to achieve your investing dreams. Instead of increasing the noise, telling you the exact steps to take to conquer the real estate investment world, we are going to share some mistakes that beginners make. By avoiding these common pitfalls, you will have a better chance at succeeding in the beginning, which could lead to long-term investment success.
Not Enough Research and Planning
The keys to success in any field are research, planning, and goal setting. Real estate investing is no different. Before you jump in, you need to understand the local market. Talk to local experts, property managers, and real estate agents about trends in the area, property values, market rates, and residents. And don’t forget the legwork – there is no substitute for seeing and walking properties in person, driving the neighborhood, and understanding the nuances of the things that impact value. You can never know too much, and knowledge is power. Going into an investment decision empowered with information will lead to stronger outcomes.
You also need to have goals for your investments. Setting income goals, calendar goals, and outcome goals will help you to better formulate a plan. Knowing where you would like to end up will make it easier to know how to get started.
Assuming You Will Get Rich Quick
There are hundreds of books, forums, seminars, and infomercials promising all the money in the world if you just follow their easy steps. That’s not how anything in life works. There are no secrets, no magic shortcuts, no perfect solutions. Real estate investment can be lucrative, but it takes time, patience, and hard work. The success will come when you have made smart decisions backed by knowledge and information.
Poor Money Management
Another aspect of the research you need to put in before getting started is learning just how much everything will cost, and what roadblocks you could stumble upon along the way. Budgeting for only the expected is setting yourself up for failure. There will almost certainly be unforeseen circumstances that lead to greater costs, whether it is extra maintenance or repairs, taxes, insurance, or a downward trend that wasn’t predicted. In addition, most projects take longer than expected due to permitting and building code issues, contractor delays, weather, etc. Be sure to include the additional carry costs that result from unplanned delays in project completion or sales marketing time. It is necessary to allow room in your budget for unexpected costs. Accurately estimating your costs and adding an amount for contingency items will ensure that you are protected from running out of money and halting your project.
Preparation is the most important key to success as a real estate investor. While no one can predict the outcome of any real estate deal, you can be fully prepared and armed with information that will lead you to success in both the short and long term.