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Avoiding Common Investing Mistakes

Real Estate Agent with Realnet Tampa Bay

As with any investment option, real estate investment isn’t foolproof; many make mistakes that can cause them to fail. You want to avoid these mistakes so that your investments are successful and profitable. Here are some of the biggest mistakes beginning investors make, and how you can avoid making them yourself.

Perhaps the most important mistake is failure to plan; it’s very important to set goals, then make a plan to reach those goals. Oddly enough, many wannabe investors skip this step, and simply start searching foreclosure listings, throwing their money at any cheap house. The problem with that is without properly evaluating an investment you can’t be sure a property is really a good deal. If the house is only $30,000, but needs $40,000 of work done, it’s not really a deal, is it?

Successful real estate investors all share three specific traits:

  1. They write down specific goals.
  2. They create a plan that will help them achieve those goals.
  3. They follow the plan, and check their progress periodically.

So to avoid this mistake, write down your goals; are you looking to have a certain number of properties, or make a certain amount of money? Whatever your goals are, write them down, then determine what you need to do to reach those goals. A plan will also allow you to check your progress periodically, to make sure you consistently stay on track.

A second common mistake is taking advice from unknowledgeable sources. If you are looking for investment advice, you should talk to a broker; they are the ones who are going to be able to accurately answer all of your questions. Friends, family members, co-workers and neighbors all have good intentions, but making decisions based on advice from people with no knowledge of real estate investment can cost you way too much! Just remember that what works for one may not work for another.

A third mistake is buying property without researching to verify the value first. You’ll need to evaluate the investment to make sure it’s worth the price it’s listed at. You should only buy a property if the price is significantly below market value. Remember that when you’re investing in real estate, you should look at the properties as sources of income, nothing less, nothing more.

Consider the purchase price, the cost of any work the property requires, and how long that work will take. Essentially, you should ask yourself how long it will take to generate an income from this property.

Another common mistake many investors make is making emotionally based investment decisions. It’s very important to remember that when you look at Investment Properties, don’t buy a house because you fall in love with it; you always have to look at the bottom line: how much profit will I make?

You aren’t going to be living in the house; it is solely a vessel with which you will earn money. Therefore, it doesn’t matter if you like it! Avoid buying properties that appeal to you, unless they appeal to you for their value. This is important, not only when you purchase a property, but also later when the property becomes more of a liability and it’s time to sell. Too many investors fall into the trap of holding on to a property because they like it, long after they should have gotten rid of it.

Have questions? Contact us! We have a very knowledgeable staff that can help you reach your goals!

Harry F. D'Elia III
WEDO Real Estate and Beyond, LLC - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

First time investors always put too much money in the rehab and then end up losing money

May 03, 2012 10:02 PM
Greg Vander Wel
Realnet Tampa Bay - Tampa, FL

Absolutely right Harry! Thanks...

May 13, 2012 05:50 PM