Real estate is one of the most popular investment opportunities at the moment but people often go into it with a false impression of how it all works. There are so many reality TV shows about property investment that make it look simple and people often think that it’ll be like that in real life, but it isn’t. While you can make a lot of money by flipping houses or renting them out, it’s not anywhere near as easy as the TV shows make out. There are a lot of common mistakes that people make when they start investing in real estate without knowing what they’re doing and the key to success is avoiding them. These are the mistakes that you’re likely to make on your first real estate investment.
Know What You’re Getting Into
If you’ve watched a couple of TV shows about property investment and think that you know what you’re doing, you’re wrong and you need a reality check. Those programs show somebody buying a house, getting a construction crew in to renovate it, and then either selling or renting it out for a big profit. Those are all parts of the process, but they miss out a whole lot of other stuff in between. They don’t show you, for example, any of the legal aspects or costs involved with buying a house, or the complicated tax situation involved with earning money from renting a house. They also give a false impression of how quickly you can renovate a house. On those shows, it looks like they do it in just a couple of days but in reality, it’s going to take months of hands on work.
Borrowing Outside Your Means
You’re probably going to have to borrow some money to buy the property and you have to be very careful. When you go to the bank they’ll tell you the maximum amount that you’re eligible to borrow but you shouldn’t take it. If you’re overstretching yourself, it’ll be a long time before you can pay it off and start making a large profit. It’s better to start with something smaller and once you’ve paid that initial loan off, you can go for something larger for your second property. One of the best ways to reduce costs for your first property is to buy abroad where prices are lower. Look at https://www.rumah.com/ruko/disewa to get a better idea of what’s out there. The only problem is that when you’re buying a property abroad you need to keep in mind that you can’t always be there so you’ll need to find somebody over there that can handle the day to day running of the house. The best way to decide how much you need is to look at some houses beforehand and decide what you want before going to ask for a loan, that way you won’t be tempted to borrow outside your means.
Thinking It’s A Hands Off Investment
One of the biggest misconceptions about real estate is that it’s going to be an easy, hands off investment. People think that all of the hard work comes when you’re finding the house and getting it ready to rent out and then once you’ve found a tenant, you can sit back and wait for the money to roll in. That’s not the case at all. While the workload might let up a little bit, you’re still eligible to deal with any repairs and maintenance that need doing on the house, and you’ll have to find new tenants from time to time when people decide to move on. If you aren’t quick with your repairs, tenants are going to get annoyed and you’ll get a reputation as a bad landlord which will cause you a lot of problems in the future.
Any House Sells
We’re hearing a lot about the housing crisis at the moment which often gives people a false impression about finding tenants. A lot of first time landlords think that there’s such a shortage of houses that any house will be easy to rent out or sells. That’s not the case at all. A house in an unpopular neighborhood that doesn’t have any amenities or good schools nearby is going to be difficult to rent out. You’ll probably be able to find somebody but you won’t be able to charge that much in rent. If you’re going to make any good money, you need to find somewhere in a great location with shops etc. nearby and a low crime rate if you’re going to be able to rent for a good price. Before you sign off on anything, it’s worth talking to some of the neighbors and asking them about the area and whether they like living there or not. For more information on picking the best location, visit https://www.investopedia.com/university/home/home1.asp.
Cutting Costs
Being sensible with your money is obviously a good idea but you need to be careful where you’re trying to make savings. When you’re choosing a real estate agent, don’t just go for the one that takes the least commission. They might not know the area that well and the properties that they find might not be that good. If you’re relying on them to rent the property out for you, you need to make sure that you’ve got the best person for the job. The best thing to look for is personal testimony from past customers that can vouch for them.
Another place that people often try to cut costs is the renovation of the house but that’s never a good idea. When you’re trying to find contractors to renovate the place, going for the cheapest one is going to cost you more money in the long run. If they don’t do a good job, potential tenants won’t be impressed when they come to look around and you’ll struggle to rent the place out. Just like your real estate agent, you should be looking at personal recommendations and be willing to pay a bit more money for a professional job.If you think that real estate investment is an easy way to make money, you’re wrong. But if you avoid these common mistakes, you should get on fine.
