If you are looking to invest in real estate for the first time, you may be excited about the potential for major profits. However, there are plenty of traps that people can fall into if they are not careful, resulting in a serious loss of potential income. Here are five traps you should watch out for as a new real estate investor:
- Going into investing without a plan
- Investing in real estate is not as simple as picking a property, fixing it up, and reselling it. You need to have a plan for exactly how you intend to profit off of it, whether by flipping it or by renting it out over an extended period of time. These differing methods require different investment strategies, and every real estate investor should plan accordingly.
- Putting all your money into one property
- It is very tempting, as a new real estate investor, to put all of your funds into one “dream property” that you expect to turn into a major money maker. However, this is a mistake, because if that property turns out not to be as profitable as you hope, or if something bad happens and you lose your investment, you will be in serious trouble. As with any investment plan, make sure to diversify by investing into multiple properties, so you don’t lose everything from a single bad investment.
- Investing without a realistic understanding of costs
- Buying a property to invest in is, unfortunately, just the beginning of the costs related to real estate investing. As an investor, you will need to pay for renovations and repairs, pay property taxes, and insure the property against fires and other potential hazards. If you get into an investment without a realistic understanding of what it is going to cost, you could run out of money before you have a chance to profit from your investment.
- Failing to check for potential legal issues
- A property’s value is not just related to its size, facilities, or condition, but also the legal constraints placed on it. Things like local zoning laws, easements, or covenants can all impact your ability to develop the land, and you may face issues if the property has any title defects. That is why you should consult with a real estate lawyer as part of any investment, to avoid these kinds of issues.
- Investing in a property without doing your research
- Every property has its own potential, but to understand what you can get out of an investment, you first need to do research on the property and the local market. Picking the right property can be difficult, but the more you know, the better your chances at getting a successful outcome on your investment. That is why every real estate investor should choose wisely, and not just put their money into the first property that seems appealing.
At Liongate Homebuyers, we assist our clients with a variety of services related to buying and selling real estate, including purchasing homes for cash. We have experience handling real estate financing, especially for developers and house flippers. If you are interested in selling your home for cash, please contact us at 516-548-6553, or visit our contact page.
