Investments involve risk and investing in real estate is not a get-rich-quick scheme. It takes time, perseverance, and money and you can’t afford to make any rookie mistakes. Here are the common mistakes made by first-time investors and how you can avoid them.
Investments require a lot of research and if you don’t put in due diligence, you could be involved in a bad deal. First of all, you need to do some market research. The local market condition is everything when it comes to real estate. Every market is different and just because you found a great property, if it’s in a bad market, it could be trouble. Also, a bad property in a good market could be very profitable. How do you tell the difference?
You’re going to want to carefully analyze and research the demographic trends of population growth, income, and employment in the area and this will show you which property types are in demand. Learn your market. You don’t want to invest in a property in an area with declining demographic trends.
DIY (Do It Yourself)
Sure it’s expensive to hire professionals to fix up your property but it will end up costing you more if you try to make low quality repairs yourself. If you don’t know how to repair something, you shouldn’t do it yourself. Ask an expert for an estimate on how much it will cost to fix. It will save you money in the long run.
Real estate is a numbers game. You need real operating numbers in order to make an educated decision on whether or not the property will yield a profit. Your profit is dependent on net income. If you don’t correctly calculate in the debt service and other expenses, you may not make a profit at all.
Remember to stick to your plan. If you carefully research your plan for your investment, that can make all the difference. If you don’t analyze your property properly you can risk paying more for it than what it’s worth.
No Exit Strategy
There are some things in life that you can’t plan for but if you plan for the worst, you’ll always be prepared if things go wrong. You should be optimistic but not delusional. If things don’t turn out how you want them to, you had better have a way to keep your head above water. Make sure that you know how the property will be managed, how you can do a better job running the property than the previous owner, how long it will take to make repairs, and how to get out of it if things go wrong.
Contact the specialists at HML Investments today for more information about hard money loans.