Mistakes That First-Time Real Estate Investors Come to Regret
There’s no denying that real estate can be a highly profitable area of investment. In fact, a good investment property has the power to become your primary – if not sole – source of income. However, people who are new to real estate investments often make a variety of mistakes that they quickly come to regret. With the average real estate investment representing a sizable amount of capital, it’s in the best interest of all investors to do their homework before signing any paperwork and avoid the following missteps.
Regarding Location as an Afterthought
Regarding location as an afterthought is among the biggest mistakes to avoid when investing in real estate. If you’ve ever been curious about why so many real estate investors constantly repeat the mantra “Location, location, location,” you should know there’s a very good reason. Properties found in locations with large populations, abundant demand for housing, strong local economies, high property values and robust rental rates tend to be far more profitable investments than properties found in locales with waning populations, low housing demand and struggling economies. So, if location isn’t featuring prominently into your decision-making, you’d be wise to correct this.
While there’s no denying that location isn’t the only factor for investors to consider, it’s arguably the most important. No matter how flawlessly-kept an investment property is, an unfavorable location is liable to adversely impact its ability to generate healthy returns. With this in mind, make sure to thoroughly research the location of any property in which you have an interest in investing. Taking the time to look into population, growth projections, property values, rent prices and other key factors can help ensure that you make an informed purchasing decision and dramatically diminish your chances of being hit with buyer’s remorse.
Foregoing a Prepurchase Inspection
It isn’t hard to see why some investors opt to forego prepurchase inspections. For example, if you’re extremely eager to complete a deal, it stands to reason that an inspection may hold things up. Alternatively, you may be afraid that requesting an inspection will draw the seller’s ire, thereby placing the deal in jeopardy. Furthermore, if an investment property appears to be perfectly maintained and problem-free, you may think that there’s no point in a formal inspection.
However, despite these examples, there are a number of reasons you should never purchase an investment property that hasn’t been professionally inspected. To start with, you may not be able to get the property insured in the absence of a formal inspection. Secondly, no matter how nice a property seems, a host of large-scale issues could be lurking just beneath the surface. Even if you’ve done a thorough personal walkthrough of a property, there are a plethora of problems that nonprofessionals are highly unlikely to spot.
With all this in mind, insist on a formal inspection taking place before finalizing any property deals. If a seller is unreceptive to this idea, make it clear that your willingness to purchase their property hinges upon an inspection from a certified professional. Should the seller continue to push back against an inspection, simply walk away from the deal, as this is too expensive an investment to take such an unnecessary gamble on.
Working with Unlicensed Contractors
When investing in a property that requires large-scale repairs and/or renovations, it’s understandable that you’d be looking for ways to save money. However, working with unlicensed contractors isn’t the best way to go about this. While many of them charge lower fees than their licensed counterparts, unlicensed contractors have virtually no incentive to see jobs through to completion, stay within the client’s budget or stand by their work, meaning that any savings you enjoy are likely to be strictly short-term.
There’s little wonder as to why investors in search of passive income flock to real estate. Purchasing the right investment property can generate significant returns and set the stage for many years of financial security. Still, this doesn’t mean that all investment properties represent an equally wise use of your capital, and if you’re not careful, you’re liable to find yourself stuck with a property that costs you a lot more money than it makes you. This is true in most cases for people who invested in timeshare properties to earn money by sub-renting the property. A lot of them instead end up asking themselves how to get out of my timeshare as they have found the property to be more of a liability. In the interest of avoiding such an outcome. first-time investors should be mindful of the mistakes outlined above.