When it comes to real estate investing, it would be fair to say that every mistake you make is costly. It’s at this point that some investors really struggle to keep the faith, even when the best proposition might pop up on their doorstep.
Someone who has a proven track record of investments of this ilk, particularly in the Houston area, is Allen R Hartman. He has seen investors come and go in this region of Texas, and seen all of the mistakes from the outside. This is the reason today’s article has been put together, as we take a look at some of the prime mistakes that are made for first time real estate investors.
Location, location, location
It’s something of a cliche, but the term location, location, location really couldn’t be more accurate when it comes to investing. Unfortunately, many first-time investors get this completely wrong.
Some of them simply look at a photo of their favorite area and go from there, while others might choose the place in which they grew up. Suffice to say, both are major errors, and you should instead be following the money. When we talk about following the money, it’s all about analyzing what other rental properties are in the vicinity, and also of any laws which might impact your return.
Of course, if you have any familiarity with the area it’s going to be an aid, but don’t let this be the top thing which is driving you.
You overestimate how much income you will make
This is another exceptionally common mistake, particularly if you are dealing with a potentially lucractive area like Houston. Even though it might seem completely profitable on paper, it’s not until the money starts coming in that you can really be sure of your income.
This doesn’t just relate to how much rent you can charge tenants either. It also relates to the amount of time you have between tenancies, which so many new investors don’t account for and therefore lose money in. Just because a property is ready to be rented, it doesn’t mean to say that a tenant is going to move in on the exact same day. It could in fact take months, which obviously impacts your bottom line significantly.
The opposite problem: you underestimate costs
Following on from the above, let’s now turn to the opposite problem. We’re referring to the issue where you completely underestimate the amount of money that you’re going to spend on real estate.
In truth, this could be due to a whole host of reasons. For some people, it might be because they have not budgeted for as much money as they need on property repairs, before the building hits the market. For others, it might be because they’ve completely forgotten to include the likes of agent fees and insurance in their calculations. While this might seem a simple mistake, it’s unfortunately a very common one.