Although real estate investing is one of the best ways to secure your financial future, not everyone succeeds at it. Usually it is due to a few basic mistakes. Here are 4 reasons why investors commonly fail.
No defined goal. Why are you investing in real estate? Quick flip for profit? Cash flow? Residual income for retirement? Different goals will require different investing methods. If you understand your investment goals, you'll know how to purchase properties that will help you further those goals.
Lack of due diligence. Often, new investors are so quick to seal the deal that they neglect to perform due diligence on the transaction. The property might have hidden structural problems that will drain your cash reserves. You'll need to get a professional property inspection and ask the seller questions such as when they bought the home and why they are selling. You'll also need to consider things such as demographics of the area, transportation routes, zoning, crime rates, flood zones, and quality of schools. Are there amenities that would appeal to potential tenants? If you don't understand your market, you can't set a realistic rental rate or attract qualified residents.
Doing it all on your own. You can't be an expert in everything. It helps to have a team of experienced professionals you can rely on for tasks from home repairs to legal issues. At a minimum, your team should include an experienced real estate agent, attorney, insurance representative, home inspector, and handyman. You might also want to consider working with a full-service property management company who will take care of all aspects of managing your rental property and free you up to grow your investment business.
Underestimating time and cost. There's a lot more to owning a rental property than paying the mortgage. Investors face the same challenges that homeowners do. Routine appliance maintenance and repairs, plumbing and electrical upkeep, structural repairs, painting, outside maintenance – all these expenses can quickly drain your bank account. Vacancies can also doom your property investment. It's important that you consider all these expenses and make sure you have enough reserve funds to get you through the highs and lows of this uncertain industry.
Real estate investing is not a get rich quick scheme. If it were easy, everyone would be doing it. However, through research, due diligence, and leveraging your team of experts, you can greatly limit your risk and increase your chances of success. For more information, contact a company like The Alan Smith Team - RE/MAX Professionals.