Real Estate Investing - Avoiding The ‘Frequently Made Mistakes’

Real estate investing has been the American dream. However, it’s not for the faint-hearted, many have lost money because they made mistakes. It’s a risky business so you need to know the ‘how to’s or you could join the ones who lost money rather than made it.

You know what some real-estate gurus tell you - Real estate investing is easy! It’s as simple as finding a low-priced property, getting it painted, plant some greenery, and wait for buyers to fight for it - so they say. They entice you into real estate investing by telling you it’s possible without even putting in a dollar.

A common scenario is someone who invests over a couple of thousand dollars for one of these Real estate investing seminars with some hot-shot investing guru. Excited about the prospect of making enough money to retire on, they become convinced that real estate investing is their answer. Only a year or so later, and they’ve realized that investing isn’t a quick fix, and it takes more than a seminar to be successful.

There are many pitfalls that new investors can make which we can only cover a few of - but at least it’s a start. Here are three of the main ones.

If you go into real estate investing emotionally, and not as a business venture, you’ll definitely lose out. What does this mean? Well, say you find a property that you immediately fall in love with. It’s so cute, it’s got a pretty garden, it’s got character etc. You will be making an emotional buy and not an objective one that should be considering the suitability of price, for tenants, and even resell prospects.

The less knowledge you have about real estate investment, the more risk you’ll be taking. Investing blind means buying real estate as if your eyes are shut - such as blinding believing all you’re told at real estate seminars or agents. You must do your research; read and read and then read some more on the subject; ask others who have been successful and learn from them. Just a little lack of knowledge could mean that you end up with a bad buy.

Many real estate investors have fallen due to lack of cash flow. This is the key phase for survival in the investing business. Not having cash reserves makes your position very risky and shaky. Sure you can use your credit but credit needs repayment. And that investment property will have hidden costs. The more pressure you’re under the easier it is to make silly mistakes. Make sure you allow for sufficient cash flow.

Research is only as good as knowing what to look for. An example; say you were investing using the ‘fix and flip’ technique which means re-selling quickly for a profit.

Say you buy a property that looks like it fits all the requirements. You spend a little bit of time researching and checking zoning requirements. All seems good and you spend money and time doing it up. Only to find out that you hadn’t checked requirements carefully enough and you’ve created an apartment block with too many apartments for the zoning area. Guess who’s going to be out of money? Do your reading for knowledge and your research for reducing risk.

So, you’re ready for your property to be tenanted. Don’t rush in and accept the first people who apply. It’s very gratifying to know that someone wants to live in your newly acquired property, and the cash would definitely come in handy with bank bills to pay. But it is well known by long-term real estate investors that bad tenants cost a lot more than a couple of weeks waiting for the right ones to come along. Screen your tenants - choose carefully. Getting references is a good start.

Summary:

To succeed in real estate investing you need to read for knowledge and research to reduce risk. Then you won’t get sucked-in by real estate investment gurus offering you the world for nothing.

About the Author

Brooke Hayles
Check Out More Helpful Information About Investing For FREE!
Visit {a href= http://investingvault.com/} Investing Vault now!

5 Essential Principles For Real Estate Investing

It’s no secret that real estate investing has become the “weapon of choice” for many investors. With the stock market growing more and more uncertain it’s not hard to understand why. While real estate investing can be very lucrative and when done right can present very little risk, it’s important to remember that timeless adage “knowledge is key”. As with any financial decision to be made, no one should jump into real estate investing without gaining as much knowledge as possible on the front end. While it is true that experience is the best teacher, having a good knowledge base to begin with might just make your experience a little less scary. With this in mind, following are five things to consider BEFORE doing your first deal.

1. Tend to your personal finances first Many prospective investors view real estate as a means to get out of financial trouble. Many real estate “gurus” will advocate this practice and even use it as a selling point to sell their latest and greatest real estate investing system. I am definitely not of this mindset. Real estate investing is a great way to secure your financial future but certainly not at the expense of your financial “present”. If you are having financial problems and are having trouble making ends meet, take steps to rectify the situation before risking any money in real estate. As I stated earlier real estate investing can carry less risk than many other forms of investing, but there are still risks and if you are not in a position to handle the setbacks than you are basically just gambling and that is a very dangerous investment strategy.

2. Choose a strategy. There are many ways to make money in real estate investing. You can buy a property and immediately flip it for profit. You can buy a property and hold it banking on an increase in value in the near future. You can buy a property for rental. You can buy a distressed property and make improvements. There are countless ways to make money. The important thing to remember is that each of these strategies carries its own set of “rules”, if you will, for making a profit. Some might say you should never limit yourself to one strategy and I whole-heartedly agree in the over all realm of your real estate portfolio. What I want to stress here is that indecision in regards to each individual real estate deal can cause you a lot of heartache, frustration and LOST PROFIT, which we could all do without. Decide up front which strategy is best for you and then proceed to find a property that meets your needs.

3. Do your research While this may sound elementary, it’s very easy to get caught up in the emotion of what seems like a good deal and in the process act hastily. Always, and I mean ALWAYS thoroughly investigate a property before you sign anything. Try to determine if the property has suffered any significant damage, find out if the property is in a flood plain, find out if there is more than 1 lien against a property, etc. Create a property inspection checklist up front and check every one off before you decide to do a deal. When doing a conventional deal with a mortgage lender the lender will likely take care of a lot of these steps (they want to protect their investment as well) however, it is always good practice to pay for a thorough inspection before you make the deal.

4. Stick to a budget Decide what you can afford and are willing to spend on a real estate deal and DO NOT deviate. Many real estate investing coaches will tell you not to let a good deal go just because you don’t have the money. “Get creative” they say. While I do not shun the idea of creative financing completely I certainly don’t recommend it for the beginning investor. “Zero Down” deals can be very appealing but they also can increase your risk factor tremendously. In a nutshell, if you can’t afford it, it’s not a good deal.

5. Be prepared to walk away Never get emotionally attached to a property. Emotions can cloud your judgment causing you to make unwise decisions. It’s almost a certainty that if you stick with real estate investing long enough you will come across a deal that seems irresistible. Do not get overly excited and sell yourself on the deal before due diligence is done. This mindset can cause you to overlook some warning signs that otherwise might be deal breakers. Go back and read number 3 again. Be objective and be skeptical. Reserve judgment for after your inspection checklist has been completed. Always be prepared to walk away; there’s likely another prospective deal just around the corner.

These five principles are a good guideline for anyone starting out. While real estate investing can be a rollercoaster ride at times with many ups and downs, sticking to these basic principles will all but guarantee that you will come out on top. Happy Investing!

About the Author

Ryan Gibson is an avid real estate investor and webmaster for the popular investing site www.the-investment-place.com

Real Estate Investing - Avoiding The ‘Frequently Made Mistakes’

Real estate investing has been the American dream. However, it’s not for the faint-hearted, many have lost money because they made mistakes. It’s a risky business so you need to know the ‘how to’s or you could join the ones who lost money rather than made it.

You know what some real-estate gurus tell you - Real estate investing is easy! It’s as simple as finding a low-priced property, getting it painted, plant some greenery, and wait for buyers to fight for it - so they say. They entice you into real estate investing by telling you it’s possible without even putting in a dollar.

A common scenario is someone who invests over a couple of thousand dollars for one of these Real estate investing seminars with some hot-shot investing guru. Excited about the prospect of making enough money to retire on, they become convinced that real estate investing is their answer. Only a year or so later, and they’ve realized that investing isn’t a quick fix, and it takes more than a seminar to be successful.

There are many pitfalls that new investors can make which we can only cover a few of - but at least it’s a start. Here are three of the main ones.

If you go into real estate investing emotionally, and not as a business venture, you’ll definitely lose out. What does this mean? Well, say you find a property that you immediately fall in love with. It’s so cute, it’s got a pretty garden, it’s got character etc. You will be making an emotional buy and not an objective one that should be considering the suitability of price, for tenants, and even resell prospects.

The less knowledge you have about real estate investment, the more risk you’ll be taking. Investing blind means buying real estate as if your eyes are shut - such as blinding believing all you’re told at real estate seminars or agents. You must do your research; read and read and then read some more on the subject; ask others who have been successful and learn from them. Just a little lack of knowledge could mean that you end up with a bad buy.

Many real estate investors have fallen due to lack of cash flow. This is the key phase for survival in the investing business. Not having cash reserves makes your position very risky and shaky. Sure you can use your credit but credit needs repayment. And that investment property will have hidden costs. The more pressure you’re under the easier it is to make silly mistakes. Make sure you allow for sufficient cash flow.

Research is only as good as knowing what to look for. An example; say you were investing using the ‘fix and flip’ technique which means re-selling quickly for a profit.

Say you buy a property that looks like it fits all the requirements. You spend a little bit of time researching and checking zoning requirements. All seems good and you spend money and time doing it up. Only to find out that you hadn’t checked requirements carefully enough and you’ve created an apartment block with too many apartments for the zoning area. Guess who’s going to be out of money? Do your reading for knowledge and your research for reducing risk.

So, you’re ready for your property to be tenanted. Don’t rush in and accept the first people who apply. It’s very gratifying to know that someone wants to live in your newly acquired property, and the cash would definitely come in handy with bank bills to pay. But it is well known by long-term real estate investors that bad tenants cost a lot more than a couple of weeks waiting for the right ones to come along. Screen your tenants - choose carefully. Getting references is a good start.

Summary:

To succeed in real estate investing you need to read for knowledge and research to reduce risk. Then you won’t get sucked-in by real estate investment gurus offering you the world for nothing.

About the Author

Brooke Hayles
Check Out More Helpful Information About Investing For FREE!
Visit {a href= http://investingvault.com/} Investing Vault now!