Real estate investing is a smart strategy to build your wealth, but to be successful at it, you’ve got to do it right. Unfortunately, too many investors fall into the trap of real estate investment mistakes. Here are some of the common ones and how to avoid them.
The Top 4 Real Estate Investment Mistakes
1. Letting a Property Sit Empty
It’s a smart strategy to find a property that will go up in value over time, allowing you to sell it for way more than you initially paid for it. If you want to be even smarter, however, avoid letting that property sit empty while it appreciates.
Why is keeping a property vacant a bad idea? Homes that sit empty for long periods of time are prone to problems that inhabited properties don’t have. They begin to smell musty and closed up. Also, issues like a roof or water leak could go on for weeks or months before someone discovers it (and the untold damage it will have caused during that time).
Whether the property is simply an investment property that you never plan to live in or a vacation property that you only get to use a couple of times a year, consider renting the property out to generate passive income. You can rent to long-term tenants or (depending on the laws in your area) short-term tenants and put the property to work for you long before you consider selling it.
2. Not Planning Beforehand
One of the biggest real estate investment mistakes is jumping into an investment property because you got what seemed like a good deal on it … but not having any idea what you’re going to do with it. Is it rentable? For how much? Will it be enough to cover your monthly expenses?
If you don’t have answers to all of these questions long before you put an offer on a property, you’re coming at things backwards. Real estate investing requires thorough planning beforehand to find the right property for your goals and financial objectives.
3. Planning to Flip Properties and Get Rich Fast
You get a deal on a run-down cottage, fix it up into a showplace, and then sell it for a profit. Then rinse and repeat until you’ve made millions in just a year or so.
If this was the way real estate investing worked, we’d all be wildly flipping properties. Unfortunately, flipping for huge returns is typically the exception and not the rule. An even better option for building wealth is taking the long-term view and investing in buy-and-hold real estate. This means waiting for a property to appreciate over time and renting it out to cover expenses and make a bit of profit in the meantime. It’s not reality TV show glamorous, but it’s a realistic way to boost your wealth in the long-term.
4. Not Getting Professional Advice
Another item on the long list of common real estate investment mistakes is going it alone. Especially if you’re new to investing in turnkey properties or are unfamiliar with the area in which you plan to buy, it makes sense to work with a real estate investment firm that can answer all of your questions, help you seek out the right properties, and guide you away from making unwise choices.
Once you’ve purchased the property, it’s a good decision to hire a property management company to run it for you. This will keep you from having to become a full-time landlord, as they’ll fill vacancies if a tenant moves out, screen potential tenants, handle payments, complaints, and requests, as well as make sure the property is properly maintained and kept up to top-notch standards. Because property management companies specialize in their field, they’ve dealt with everything and know exactly how to handle things, no matter what kind of situation may arise. This takes a tremendous amount of pressure off of you, freeing you up to focus on your current job or simply relax if you’re retired.
By avoiding these common real estate investment mistakes, you’ll be on a better track to finding the right property and the best tenants for it while generating passive income for years to come.