Common Mistakes to Avoid in Real Estate Investing: Expert Tips

When getting started in real estate investing, it’s essential to avoid crucial investor mistakes. At first, it’s easy for errors to happen, but if they continue and pile up, they can keep your portfolio and income from growing, seriously impact cash flow, and have long-term implications on your chances of success in the future.

When creating passive income and building wealth through real estate, it’s not always easy to know what exactly you are doing wrong or if there’s a better way to do it until you’ve made a mistake. To help you keep an eye out for potential missteps, our real estate investment experts will share some of the biggest mistakes a real estate investor can avoid to boost success.

Common Mistake 1: Having No Defined Plans

Residential investing is a long game. It can take years to build up a portfolio of properties— and if you fail to plan appropriately, you could lose money instead of making it.

One of the most costly mistakes first-time investors make is failing to make a plan. Without a solid roadmap and thorough research, you’ll never know where and how to focus your efforts, and you’ll likely miss valuable opportunities.

To avoid this common pitfall, it is important to create a detailed plan that includes everything from the property type you’d like to invest in, the amount of money you’re willing to spend to get started, the investment opportunities available, and how much money you want to make long-term. Once you’ve got a clear idea of what you want to achieve and have completed your due diligence and financial planning, you’ll be able to forecast exactly how much work needs to be done and what capital needs to be invested for you to be cash flow positive.

Common Mistake 2: Letting Emotions Cloud Your Judgment

It’s easy to follow your gut when investing in real estate. When you feel emotionally attached to a property, looking at its flaws objectively can be hard. However, if you follow only your heart instead of your head, you could wind up overpaying without an exit strategy.

Don’t let personal feelings about a particular property cloud your judgment, causing you to overlook problems that would otherwise be obvious. For example, if you find a property that seems perfect, you might ignore mold, water damage issues, or other costly renovations. Or, if you hate a potential property based on a few photos, you might focus too much on the negative aspects, ignoring the potential benefits, like market conditions and low property taxes.

Instead of letting your emotions control your decision-making, try to remain objective when doing your due diligence. Look at numbers, meet with a local real estate agent, and analyze nearby comps and the real estate market, as they will impact your investment strategy. Try to figure out whether or not it will be a good investment property.

Common Mistake 3: Not Having a Team

Another costly mistake for real estate investors is not having a team of industry professionals for support. Working with a team means you can access their knowledge and expertise, making the most of your investment strategy. It’s easy to fall into the trap of doing everything yourself, but the most successful investors delegate tasks to others for better success.

To avoid this issue, build an investing team of professionals. Hire a property manager for rental properties. The best way to maximize cash flow for these investments is to hire a professional property management company to take care of the day-to-day operations, like cleaning, vacancies, and rental income. Property taxes can quickly become a nightmare for real estate investors. Property investors can have peace of mind about tax filings and deductions by hiring an accountant to manage their taxes and explore tax benefits.

A financial advisor is there to help you understand income, from managing unexpected costs to taking on too much debt; they are there to help differentiate a good investment from a bad one. With a reliable mortgage professional, a real estate investor has financing in place to move quickly when buying new properties when needed and can get the best interest rates available.

Having a qualified home inspector on your team is imperative. They can point out significant flaws in a home to help you avoid a real estate investing mistake. Or, after property inspection if you’re not looking to have the place renovated beforehand, you will at least know what kind of damages to repair before renting or planning an exit strategy.

Last but not least, having a real estate agent you can trust is vital to a successful investment plan. Partnering with a knowledgeable agent helps real estate investors find good properties that meet their goals. The right agent also helps you negotiate the best purchase price and navigate the buying and selling process.

Common Mistake 4: Underestimating Expenses

Many novice investors underestimate expenses when investing in real estate. That’s why it’s essential to consider all of the costs of owning property. There are additional expenses outised of the purchase price: you’ll be responsible for closing costs, property inspection fees, mortgage payments, property taxes, insurance, utilities, and other unexpected costs as ongoing operating expenses.

You’ll need to factor in the cost of repairs and renovations, which can add up quickly, especially if you’re planning to sell your investment property quickly or as fix and flip.

Common Mistake 5: Not Studying the Fundamentals of Real Estate Investing 101

Real estate investing is a complex field. If you don’t take the time to learn the basics, you could make a disastrous investment decision.

Before making this mistake with a real estate investment, study the ins and outs of real estate investments. Start by learning about the different properties, investment strategies, and what other investors do to find properties and make money. Once you have a foundation for real estate investing 101, you can buy properties and pursue your goals!

Common Mistake 6: Trusting Unqualified Professionals

When building your real estate investment team, beware of everyone who offers help. Some may not be qualified to do so. Make sure each person who mentors you or joins your team has verifiable real estate experience to avoid making bad and costly decisions that will impact your chances of success.

Before you decide to hire anyone to help you invest in property, ask yourself these questions:

• Do they have a proven track record working with real estate investors? 
• Are they licensed to work in their field of expertise?
• What kind of returns have they seen?
• How much money have they lost?
• What is their specialty within real estate investing? Short-term rental properties, fix and flips, REITs, etc.?
  

In addition to asking these questions, it’s important to investigate their background, check online reviews, and talk to other investors about their experience working together. You can never do too much research.