Whether you come from a completely different background or your family has been investing in real estate for generations, you are going to make some mistakes. It is important to understand that everyone makes mistakes. Successful people know that and take steps to minimize the severity of their miscalculations, recover, and move forward stronger and wiser as a result.
Many newbie investors make understandable mistakes, get discouraged, and give up. You are not going to do that. You already know that owning real estate involves a lot of maintenance, preventative maintenance, and repair. Your business plan and investment decisions are much the same way. Here are some preventative maintenance tips to help you avoid three common mistakes.
1. Skipping a thorough analysis
While many novice investors know that real estate investments have tried-and-true formulas that must add up for a property to be profitable, they don’t always pay them proper attention. They get excited when they get close to the action. Perhaps they get distracted by a shrewd seller or sales agent who takes advantage of their naivete. Maybe they are just impatient to get into an investment.
Don’t skip doing a thorough analysis of the numbers. Don’t bend the numbers just to make the deal work. The numbers don’t lie. If you don’t like what they tell you, check them twice. If they are telling you the property is not a good investment, move on.
2. Trying to do everything themselves
People often overestimate what they can accomplish, which is why people abandon goals like exercising and returning to school. Once they do actually experience muscle aches, injuries, failure, and pain, they abandon their goals or push them out a little further into the future and procrastinate.
Real estate investors don’t get the option of procrastinating. They have people depending on them and legal obligations. However, many do make the mistake of overestimating what they can do themselves. When they visualize things like lawn care, maintenance, answering phones, navigating legal documents, and managing tenants, they see themselves being able to take care of it all but soon appreciate the value of having a team of consultants and contractors.
3. Underestimating costs
This ties in with the other two mistakes. Once again, the numbers don’t lie. You can’t ignore them, and you must have adequate capital to cover operating costs, maintain insurance, conduct preventative maintenance and make repairs. You will not be able to do everything yourself. You have to pay some people to help you get everything done. Make sure all necessary costs are included when you analyze an investment.
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