Top 10 Mistakes Investors Make In Real Estate Investing

by Michael | 6 Replies

Real estate investing can be fun and exciting, yet it is easy to make mistakes and end up with a poor investment.

I have compiled what I think are the top ten mistakes that investors make when investing in real estate.  If you can avoid making these 10 mistakes, you will be well on your way to being a successful real estate investor.

Here are the 10 ten mistakes.

1) Not paying attention to real estate cycles.

It is easy to get caught up in rapidly rising prices when real estate mania hits.  But the best investors try to keep their emotions out of their investment decisions, so when things become crazy they can take advantage of high prices and exit the market.  Following the real estate cycles will stop you from buying when prices are peaking, and alert you to the best time to begin buying again when prices are low.

2) Letting fear and hesitation keep you from getting started.

It is natural to be unsure when starting out in any activity.  But the only way to become a real estate investor is to go out, look at properties, and ultimately buy some real estate.  Face your fears and get started today!

3) Not becoming active in your local real estate investor club.

Local real estate clubs are a great way to meet other real estate investors, especially those who have been investing for many years.  You will pick up a lot of important information, and make invaluable contacts.  A great place to start is to search for “real estate investment clubs” in your area.  Meetups are also a popular way to meet like-minded people interested in all sorts of topics.  Check out the real estate meetups in your area at www.meetup.com.  If you can’t find one in your area, think about starting one!

4) Thinking short-term when you should be thinking long-term.

Success in real estate investing takes time and effort, just like with any other business.  New business owners don’t expect big profits to start flowing in the door a month after starting the business.  It takes time.  Plus, because of the high dollar amounts that are regularly involved with purchasing real estate, investors sometimes take awhile to actually start investing.

Don’t get discouraged if you are not having much luck right away.  Give yourself some time to find deals.  You may have to look at 50 properties before you find one that is a great deal.  The key is to do a little each day as you work towards your goals.

5) Not obtaining proper insurance coverage for your properties.

Make sure you have adequate liability coverage for fire, floods, and other calamities. Look to see if you can purchase a home warranty in your state.

6) Not developing a plan to protect your real estate assets.

Experienced investors usually do not hold real estate in their own personal name, as they want to protect their personal assets from any possible lawsuits or legal problems related to their real estate.  Investors like to hold property in LLCs, partnerships, or other legal entities.  Always get competent legal advice on the best entity to hold your property in.

7) Not having a strong team in place.

The best time to put together your team is before you start investing.  You should be looking to build relationships with real estate agents, property managers, contractors, repair people, handymen, real estate attorneys, title companies, CPAs, other investors, and of course, with mortgage brokers, banks, and other lenders.

8) Spending too much money on a property / not doing your due diligence on a property.

Due diligence refers to doing your homework on a property, not only as to its value, but as to its location, desirability, and other factors.  Having a good team in place before you invest will allow you to accurately estimate what a property will cost to fix up, or what a property will sell for or rent for when it is fixed up.

9) Having poor records management of your properties.

Keeping proper track of income, expenses, taxes, and other financial data for your real estate is vital.  Invest in a good software program, hire a bookkeeper, or get help in designing a system that is simple and easy to use.

10)  Not screening tenants property.

For investors that manage their own properties, screening tenants in a thorough manner will avoid many headaches later.  Make sure your applicants completely fill out their rental applications, and be sure to run their credit reports. Always verify everything that is written on the application.

Following these 10 tips will help jumpstart your journey to becoming a successful real estate investor.  Start today!