Top 10 Mistakes to Avoid When Investing in Real Estate

Investing in real estate is very beneficial and rewarding. Most people are attracted to investing in real estate. If you are also planning to invest in real estate, then be sure to avoid some common mistakes that everyone makes. In this blog, we will discuss the Top 10 Mistakes to avoid when investing in real estate.
*1.72 billion is the estimated market size of real estate.

List of Top 10 Mistakes to avoid when investing in real estate

1. Not doing enough research.
   
2. Taking too much Debt
   
3. Lack of clear strategy
   
4. Lack of proper property investigation
   
5. Don’t know the importance of Location
   
6. Become emotionally attached to the property
   
7. Looking more to aesthetics, not quality
   
8. Lack of strong team
   
9. Not aware of unexpected expenses
   
10. Ignore cash flow

Not Doing Enough Research

While investing in real estate, people do not do any research on market dynamics and invest in declining areas or poor future growth areas. This mistake makes them unprofitable. In mistake of research, people do not compare the prices of the same area and get the property at overpaid prices.
Solution:

• Before investing, research local trends, comparable prices, future development areas, and market dynamics.
  
• Study about rental prices and nearby sales.
  
• Research about infrastructure plans and city development plans.

Taking Too Much Debt

When you invest in real estate, you take too much debt which effects on your returns. It is also a risk when your property’s value decreases from the amount you purchase. At the time of investment, you take loan without understanding any future inconsistency and in future you are not able to pay the loan due to financial crunch.
Solution:

• Take a minimum amount of loan that you can pay easily
  
• Use fixed-rate mortgage
  
• Make a saving buffer plan to avoid too much debt.

Lack of Clear Strategy

Lack of clear strategy can be caused by impulse decisions. You buy those properties that you don’t want to buy and these properties don’t match your financial objectives. Due to a lack of strategy, you make inconsistent and contradictory decisions.
Solution:

• Firstly, set a clear strategy
  
• Match your property with your strategy.

Lack of Proper Property investigation

If you fail to investigate the property properly and after purchasing you have to face critical issues including mold, plumbing, foundation problems, and many more. If you go to see the property, you just look at the exterior of the house and underestimate the repairs.
Solution:

• Hire a professional property planner
  
• Always be prepared for the repair costs.

Don’t Know the Importance of Location

Sometimes, you don’t know the importance of the location. You purchase the property anywhere. Most places are not profitable in the future due to location and area. Those areas with good schools, nearby hospitals, shops, malls, and more growing employment opportunities area can be beneficial for you.
Solution:

• Choose the location with strong growth
  
• Always consider nearby suburbs and employment growth
  
• Research local areas, crime rates, hospitals, and many more.

Become Emotionally Attached to the Property

Emotionally attachment can be the cause of wrong property selection. Due to the attachment to the property, people don’t have the power of judgment. That is why they select the wrong property. You may disregard others for potentially better opportunities.
Solution:

• Always keep in mind that investment is for maximizing return not for personal satisfaction.
  
• Avoid Personal emotional attachment because it can align with your investment strategy.

Looking More to Aesthetic, Not Quality

Mostly investors give their more importance to looks not the quality of the property. As we see some properties seem aesthetic, but the manufacturing quality is very low. There is no proper arrangement of water and electricity supply. After investing in those properties, we have to invest more money in repairing them.
Solution:

• Always check the quality of the property
  
• Consider the factors that need more repairs and renovation
  
• Check the property that will be same over the time.

Lack of Strong Team

As we know, real estate investing is complex to select the best property and if we dont have an expert team then we are not able to select the best property. You can’t manage the investment without the expert team. Without any professional contractor and lawyer, you will have to face the issue regarding the cost.
Solutions:

• Build a team of professionals who specialize in investing properties.
  
• Always work with experienced people, so that you can learn investing easily.

Not Aware of Unexpected Expenses

Investors only focus on property investment but don’t give any attention to unexpected expenses like roof leaks, broken windows, and many more. Most of the properties need repair, property taxes, insurance, vacancy periods, and many more. This type of unexpected expense can be costly.
Solution:

• Make a budget for unexpected expenses
  
• Prepare for vacancies during periods of low cash flow.

Ignore cash flow

We do not see the cash flow of the property. It means that s that in the future, the property rate will increase or decline affecting our cash flow. If you take too much debt to invest in property but property does not give you that much profit in the future.
Solution:

• Focus on consistent property cash flow which generates profit in the future.
  
• Evaluate the rental income properly.

Conclusion

In this, we can easily conclude that mistakes can happen but not every time. If you have made mistakes while investing in real estate and now planning again to invest then avoid these mistakes. Real estate is very beneficial but only if you select the best investment. Always keep in mind about the things which we want in the property and then select the best property for you.

FAQs for Top mistakes to avoid when investing in Real Estate

Q. What factors are considered while selecting the property?

Answer: There are some important factors that you should consider while selecting the property:

• Location
  
• Property type
  
• Price & market value
  
• Property condition
  
• Cash flow and rental income potential
  
• Loan options
  
• Operating costs
  
• Market condition

Q. How to calculate ROI for real estate?

Answer: For calculating the ROI for real estate, consider the following steps:

• Estimate the rental income earned annually
  
• Subtract all the expenses like mortgage payments, property taxes, and many more.
  
• Calculate the annual net income by subtracting the expenses from rental income
  
• ROI= (Total Investment\Net Income​) ×100

Q. What is the biggest mistake in real estate that we should not do again?

Answer: The biggest mistake in all the mistakes for investing in real estate is that not doing any market research. Without research, you can grab the best opportunity at best prices. Always research first and then invest.

Q. What are the tips to invest in real estate?

Answer: Some important tips that you should consider while investing in real estate:

• Research properly
  
• Clear investment strategy
  
• Start from small Build a strong financial foundation
  
• Focus on location
  
• Think long term
  
• Make a contingency plan