Despite what television shows have glamorized, investing in real estate as an income is nowhere near a simple task. Although there are many mistakes that an investor is liable to make, here are a few of the top reasons that can usually cause an issue.
Calculating Cash Flow.
One of the largest mistakes that can be made by a potential real estate investor is not properly calculating the possible cash flow and expenses. Making sure that the income will exceed the expenses involved, as well as maintaining profit to keep in the bank, is the biggest aspect to investing in real estate.
Assuming Investing is ‘Low Risk’.
There are a large number of things to could pop up that could cause you, as the investor, an issue. Ranging from appliance malfunctions to weather damages, anything could happen. Not doing your homework and considering all of the extra aspects into your plans and calculations can be one of the biggest downfalls to being an investor, and cost you’re a large amount of money.
Using realistic and conservative numbers during your estimations and calculations will help save you some serious headaches in the long run. Overestimating on property income and underestimating on property expenses and vacancy is often one of the biggest mistakes. Over pricing your home can lead to long, unexpected vacancies which still cost money in the end.
Renovation and Repair Estimates.
Another estimating problem can occur during renovations or repairs. Poorly estimating the cost of a $60,000 renovation at a meager $25,000 can be a huge problem as well. Not only is underestimating the cost of the repairs or renovations is big mistake, but so is underestimating the amount of time they will take. This can set you back in a deal with a client and cost more than you anticipated.
‘Flipping’ Properties is Little Work, Big Payday.
Wrong. Just flat out wrong. Being a real estate investor means a lot of work. And even more so for a ‘big payday’. More often than not, most people who try to become an investor end up losing money because they assume it will be easy and highly profitable. There is a large amount of homework to be done, continuously, to stay on top of the properties and the investments needed for them in order to see a return. Due diligence is the best way to ensure you see profit coming from your real estate investments.