There is no question real estate investors as well as first time home buyers have to confront numerous frustratingly daunting obstacles during the first couple of months or a year. This is especially true when you talk about buying or selling properties in a relatively slow market.
Sure, real estate investments can make you a lot of money, but no way is to make that money easy. In light of this, mentioned below are some green-thumb problems that most real estate investors have to fight through. However, you can make sure you don’t make the same mistakes.
4 complications that can be problematic for new real estate investors
- Not doing proper/ enough research
Whenever you decide to buy a new laptop, a smartphone, or a TV, you do plenty of research comparing prices, models, features, etc. That makes a lot of sense since you want to get the best value for money, and you need something that is going to serve you well. The same goes for real estate. Doing adequate due diligence and asking the right questions before purchasing a property is even more vital and rigorous.
Moreover, if you seek to become a defining real estate investor, you need to understand that there are various research considerations to keep in mind when it comes to different types of property investments. For example, the due diligence for flippers, land developers, home buying, home selling, renting, etc. is different.
In addition, if you are a prospective home buyer, you are going to have to ask all the right questions and inquire about the neighborhood you intend to move to.
- Refrain from carrying all the burden on your shoulders
There are plenty of real estate investors who like to think of themselves as self-proclaimed industry experts. And so they think they can handle everything on their own, including closing the real estate transaction without any legal representation.
It doesn’t matter if you have closed a deal or two in the past, and it doesn’t matter if everything was smooth sailing. You have to understand that there can be situations where not everything will go according to plan. You have no power over unforeseen consequences, especially when a hot market suddenly transitions into a slow market.
Remember that nobody in their right mind will help you turn a sour deal into a favorable transaction. That is precisely why as a new or fledgling real estate investor; you should befriend true industry experts and call in every credible resource you can consult with. Create a small team of knowledgeable professionals starting with finding an expert real estate agent.
Then look for a reputed handyman or contractor and try to hire a competent home inspector and a real estate lawyer. These are all experts that are going to help find potential flaws in your deals and help make red flags more apparent. For example, a good real estate lawyer will help locate defects or discrepancies in real estate titles or easements, both of which are massive complications that come back to bite you in the back.
- Do not overpay
This point also ties into doing adequate research. You see, looking for the right property to buy or flip can be overly time-intensive, and it can also be frustratingly daunting. And when you do find a property to buy after searching for days or weeks or even months, the last thing you would want is the seller to refuse your proposal. So naturally, there is going to be a sense of anxiety here. This is where most investors panic and overpay for a property they could have saved thousands on.
The problem with jumping the gun or being anxious is that you are going to end up overbidding for the property, which is good for the seller but very financially detrimental to you. There is no need to overburden yourself by taking out a new loan to fund a property.
Due diligence is the only way you can steer clear out of a potentially overpriced deal. The best way to understand if your investment carries a high price is to do a complete analysis of similar properties in and around the area. Find out how much those home were sold for in the past months. Or you could hire the help of an expert real estate agent who will be able to get you all these facts and figures.
If you don’t want to hire a real estate agent just yet, another option is to check the real estate listing in the local newspaper or do some research online. Logically, until and unless a particular home or commercial property has something unique to offer, something that can help increase its value in the future, the buyer has the power to keep the bids consistent with other properties in the area.
- Do not underestimate your expenses
If you ask any new or old homeowner or even a property flipper, everybody is going to attest to the simple truth that owning or investing in property comes with plenty of different expenses and not just the mortgage. For example, maintaining your investment vehicle can run into thousands of dollars; this includes landscaping costs, costs of painting the house, furnishing the house, buying appliances, etc. Not to mention, installing new water heating systems or a roof can also be quite heavy on the wallet.
The simple point is, being a first-time real estate investor, it can be detrimental to your deal if you do not consider all of the costs associated with your investment. It doesn’t matter if you are looking to buy, rent or flip a property. No matter what type of real estate investor you are, your priority should always be to save money.
To put it quite honestly, if investing in real estate were that simple or easy, don’t you think everybody else would be doing the same thing? Sure, the profit margins are decent and in some cases, quite lucrative, but the fact of the matter is you have to be prepared, you have to be knowledgeable, and you have to appropriately plan everything before closing the deal or signing the contract.