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5 Most Common Mistakes of Real Estate Investors


Posted: April 17, 2019 by Anna Jotham

Real estate investing, like any type of investing, comes with a learning curve. As they gain understanding of the market and property-related pitfalls, newer investors face several common mistakes. For some of those investors, lessons come at a price, while for others, common missteps can be quickly rectified. Let’s examine some of the most common mistakes real estate investors make.

 

Property investment offers learning opportunities—so embrace them!

How you approach mistakes early in your real estate investment tenure can make a big difference in how your investments perform down the line. By approaching them as learning experiences, you can gain valuable skills that will pay dividends down the road. But in the meantime, we can dive down into the lessons a newbie is likely to encounter. Here are five of the common mistakes real estate investors often make.

 

1. Failing to understand the market

It’s important to surround yourself with a trusted team, but if you don’t have an understanding of what properties are worth when it comes decision time, you could come up short. Do the work and do the research, and you’ll be more likely to experience success in achieving your investment goals.

 

2. Not having an investment plan

Did the last sentence on the previous point give you pause? If you don’t have investment goals or a plan on how to get there, you’re far more likely to take missteps along the way. Get it down on paper: include your end goals and your strategy for achieving them. Then execute on it. You will quickly find it’s far easier to achieve those goals when you have a plan.

 

3. Counting solely on appreciation

Sure, appreciation can reap rewards, but don’t forget that passive investments can be a vital part of a real estate investment strategy. Properties that earn passive income can also have some worthwhile tax advantages. The bottom line: cash flow is key.

 

4. Having the wrong partnerships

Having a real estate partnership can help you afford to jump in the game, but partnerships can come at a price. Take care not to rush into just any partnership, and be wary of borrowing from friends and family, another common and associated issue. Instead, carefully select your partners so that you have the greatest level of expertise and professionalism around the table. This will serve you well over the long haul.

 

5. Hurry and hesitation

Invest too quickly and you could make a mistake. But hesitate and you could miss out on a great opportunity. Knowing when to jump is essential, and it’s common for new investors to close a deal too quickly before they’ve done enough research. Likewise, it’s common for new real estate investors to be too cautious and miss out on some great deals. Again, do your research and explore the options available to you, and you’ll gain confidence that you can make the right decision at the right time.

 

Avoid the common mistakes real estate investors can make

Mistakes in the world of real estate investing, like any investment arena, can come with some tough lessons: sometimes with an opportunity cost and sometimes with a financial loss. By using these tips to hone your skills, you can hopefully sidestep some of the more common mistakes of real estate investing and instead enjoy a rewarding foray into the world of real estate.

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