Tuesday, November 17, 2009

Mistakes New Investors Are Making in Real Estate

Many people with retirement funds to invest are headed to the world of real estate and they are making mistakes along the way. If you are looking at entering the world of real estate investing, here are some key things to keep you from making big mistakes:
Don’t get greedy! You want to generate cash reserves and a good way is flipping properties, but you need to be aware of how much profit you’ll be making.
If a $20,000 profit from a rehab project is possible, don’t expect to make $10,000 flipping the property to a rehabber. That rehabber is going to want a profit that makes it worth his risk. If you’re only clearing $2,500 on a deal, be happy and move on to the next project.
Keep a reserve of cash on hand! That is just basic business sense in any industry. If you want real estate investing to be a lasting endeavor, you need to learn to keep a cash reserve on hand. You are going to be out cash for repairs and multitudes of other expenses.
When you don’t have the cash reserves, the pressure of doing repairs grows panic. You get desperate and take tenants that may not be qualified to keep from a vacancy. With cash reserves, you have more balls in your court:
• Getting that more qualified tenant or a higher sales price
• No rush getting vacant properties filled
• And most important, getting repairs and improvements done right
Keep your eyes and mind open! Many of those people who lost trillions of dollars in the stock market recently are making the same mistakes again, buying stock blind. Buying real estate just on the word of someone is like buying stock without checking the portfolio.
Educate yourself before buying a property. The more you can learn about financing, negotiating, acquiring and the market you’re looking at the better you will be able to invest.
Get a real estate mentality! In a group of ten new investors nine of them will say they were going into real estate because somebody they know made a fast and large return on their investment.
Short-term real estate can be a gamble. Plan on six to twelve month as the market may raise and fall slow. Should the real estate market sink, don’t fret, it always comes back.
Remember real estate is a business! Because it can be a fast dollar, doesn’t mean it will be a fast dollar. “Overnight success” actually averages about 5 years to obtain.
Many new real estate investors drop out quickly. Their expectations are unreal and they don’t take the actions needed to be successful. Investing in real estate should be as serious a business as any other business path you may choose. It may be six months to a year before you make your first purchase. Keep your ears, eyes and mind open.

No comments:

Post a Comment