If you have decided to invest in real estate, you are understandably excited by the prospect. However, every new investor faces a learning curve.
Here are five tips for avoiding major mistakes as you approach initial investment opportunities.
- Going too fast
Do not rush into a purchase before finding out all you can about it. Make a thorough study of market conditions, such as neighborhoods, rents, resale values and the like. It is not unusual for an investor to review hundreds of investment opportunities before selecting one. Be prepared to put in a considerable amount of research, and resist the urge to jump into the first investment possibility that catches your eye.
- Underestimating renovation expenses
A common mistake to avoid is underestimating the cost of renovation. Once you find a property that is truly appealing to you, get several quotes from contractors regarding any renovation projects required.
- Exceeding the budget
Along with collecting estimates for all necessary work projects, you must set up a budget and stick to it. As a new real estate investor, do not let your excitement take precedence over common sense. If you are not careful, you could exceed the budget you set or possibly end up in a bidding war.
- Failing to account for soft costs
Soft costs like agent fees, closing costs and carrying costs are easy to overlook, so be sure to pencil them into your budget.
- Not working with the right team
To reduce the risk of failure, choose the right team to put in place to help you succeed as a new real estate investor. If you can, work with experienced investors who can teach you the ropes. You need to assemble a team of professionals who can guide you. An attorney will be an important team member to have because you do not want to make any legal missteps.