Many people dream about being a real estate investor. After all, the popular TV shows make it look so easy. Just buy an outdated property for cheap, fix it up quickly, and either sell it or rent it for a handsome profit. Unfortunately, reality isn’t always that simple.
Before you dive into the role of real estate investor, be mindful of the top mistakes that could hinder your success.
Mistake #1: Buying with Emotion Rather than Logic
Buying a home because it’s “cute” or reminds you of the home you grew up in isn’t what seasoned real estate investors do. Instead, they run the numbers of the property. At the bare minimum, you’ll want to estimate mortgage payments, taxes, insurance, upfront repair costs, ongoing maintenance costs, and other expenses and compare them to the estimated market rent or sale price you’ll receive for the property. When you approach a home from a numbers point of view and leave emotion aside, you’ll increase your chances of success.
Mistake #2: Taking the Wrong Advice
Everyone has an opinion. This is true for real estate investing too. When people find out what you’re doing, they’ll be eager to give you advice. However, when it comes to taking advice from people who have never invested in real estate before, take their words of wisdom with a grain of salt. A better idea is to get advice from people who understand what it takes to be a successful real estate investor, such as other investors or even your real estate agent.
Mistake #3: Not Screening Tenants Properly
If you’re going to rent the property rather than immediately sell it, be sure you thoroughly screen your potential tenant. Always run a credit and criminal background check on any tenant over age 18. Check their references too, including their past landlords. Remember, no one will blatantly tell you that they’re going to pay their rent late every month and smash holes in the walls; therefore, you need to do your due diligence in order to protect your investment.
When you’re aware of and avoid the common mistakes that could sabotage your efforts, you can move forward confidently and reap the rewards of being a real estate investor.
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