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5 Costly Real Estate Investing Mistakes and How to Avoid Them

July 25, 2019 12:57 PM | CIREIA Team (Administrator)

Whether you’re entering the field of real estate investing to offer rentals, buy and flip homes, or build up your portfolio, you must be prepared to commit to your venture. Real estate investment is a profitable, albeit high-stakes, enterprise. One misstep can cost you a lot, so it is crucial that you know how to avoid the various pitfalls that plague the industry.

real estate cost

5 Costly Real Estate Investment Missteps

Awareness is key to avoiding budget-draining traps in real estate investing. Take note of these real estate investing mistakes and the necessary preventive measures to ensure successful investments:

  1. Overspending

Rookie investors often make the mistake of overstretching on properties that meet their specific needs and preferences. This, in turn, leads to mismanaged finances and piled up debts. In extreme cases, investors may need years to regain their investment.

How to avoid this: Research before you invest. Find out if your target investment is priced high or priced right by comparing it to similar properties in the area. If you came across it in the property listings database of your real estate association, get in touch with its seller.

  1. Pursuing bargains

There is nothing wrong with a great deal, provided that it’s not the sole reason you’re securing a property. This not only limits purchase options but also increases the risk of amassing properties that won’t deliver given the current market climate.

How to avoid this: Maintain a long-term outlook when sifting through potential investments. Concentrate on growing your portfolio, drop the “discount hunter” mentality, and ensure all the deals you secure make sense.

  1. Doing everything on your own

Real estate investing does not stop once you purchase your target property. Depending on the purpose of your investment, it may also involve remodeling, maintaining, and marketing a rental property or renovating and selling a house. Either way, doing it alone is seldom the ideal option. Real estate investors who do these tasks on their own are more prone to committing costly mistakes and spreading their assets too thin.  

How to avoid this: Build a team for your venture from the get-go. Consider what you want to get out of your investment and get the necessary expert assistance to accomplish it. This may involve working with a professional contractor, an attorney that specializes in property law, a real estate agent, a property management group, and more.

  1. Listening to poor advice

When in doubt, most rookie real estate investors ask their friends and family for advice. More often than not, the person they consult with is someone they’re familiar with that has some experience on real estate. Emphasis on “some.” As a result, they get advice that’s either irrelevant to their plan or just a reassurance of their venture. Both can lead to costly problems down the line.

How to avoid this: Seek counsel from experienced investors and real estate professionals. Join an active and credible real estate investors association like CIREIA for expert tips, timely legal notifications, education courses, and more. 

  1. Not having a backup plan

Many first-time real estate investors buy a property with a single objective, usually to sell or rent it out. This drastically narrows down their options in case things don’t go according to plan.

What if the rental market in the property’s area stalls? What if the property doesn’t sell? Unless the investor finds a way to repurpose the property or turn the situation around, losses in these cases are almost unavoidable.

How to avoid this: Develop at least two backup plans before purchasing a property. For instance, if plan A is to rent out the property, plan B can be to offer it as a lease-purchase to buyers. Plan C can be to put it up for sale in the “searchable” property listings page of your real estate association. Before you seal a deal, make sure you have several foolproof ways to get out of it if things go awry.

Join a Top Real Estate Investors Association Today

As Indiana’s most trusted real estate association, CIREIA helps investors make the most of their resources, expand their connections, and realize their full potential in the industry.  Become a member and get access to comprehensive courses on networking and investor education.

Membership also entitles you to various benefits, including credit hours to Professional Housing Provided (PHP) certification, discounts from numerous local and national businesses, and more. 

Start your journey to successful real estate investments today. Call us now at (317) 670-8491!