09 Aug 6 Common Mistakes First-Time Real Estate Investors Make (and how to avoid them).
Investments in real estate remain the most guaranteed type of investment all over the world.
In fact, Dale Carnegie mentions that real estate investments have produced the largest number of millionaires, as compared to any other kind of investment.
However, there are tons of other investors who have lost both time and money in real estate investments due to certain avoidable mistakes.
We’ve all made mistakes.
It’s simply a part of living, trying and learning. And it may happen to you as part of your investment journey eventually, if it hasn’t happened already.
Wouldn’t it be nice to learn from the mistakes of others?
Mistake #1 – Not having a clear goal
Many investors believe that it is appropriate to acquire a property and figure out what to do with it later. Given the low liquidity in real estate, not having a clear plan could lead to financial distress later.
To develop a plan, some of the options you could consider include:
- Residence: Acquiring a property for residence helps you save on rent, while also enjoying capital value appreciation.
- Lease: If you are keen on creating cash flow, acquiring a property for lease is your best bet. Whether you decide to use the property for short lease or annual lease, you can still be guaranteed of some cash flow.
- Holding for short-term: This option is perfect for investors who do not intend to hold for more than 5 years. Ideally, we recommend that investors in this category subscribe to off-plan properties and hold for a period of 5 years before selling. Consequently, investors can expect to make a 100% returns on capital invested – depending on the choice of property. (Click here to see recommended off-plan properties)
- Holding for long-term: This is generally focused on intrinsic value appreciation over a long period. It is also worthy of note that this option is a perfect fit for long-term goals, such as retirement.
Mistake #2 – Bad Choice of Location
The location of a property remains one of the most vital factors in determining its long term profitability. In fact, it can be regarded as the most important factor to consider when choosing a property.
This is true because every other component of a property can be tweaked and upgraded to reflect contemporary realities, except the location.
So how do you identify a good location?
In real estate, a location is considered good if it has potentials for future appreciation. And some indicators for this include:
- The proximity of the property to basic amenities like schools, hospitals, airports, etc.
- The facilities within the estate where the property is located such as recreational facilities, commercial centers, etc.
Mistake #3 – Ignoring Paperwork
We know that feeling when you finally find a property that ticks off all the items on your checklist. That feeling of excitement, coupled with the fear of missing out.
Yes, we understand all of that.
And as a result, there is a possibility for people to ignore documents and fail to read the contract in its entirety, which could result in them losing their money, the property, or both.
We recommend that you review the documents with a legal adviser to be sure that they are authentic and up to date.
Mistake #4 – Being Afraid to take Action
For most first time investors, being afraid to take action is the common enemy.
Interestingly, we have found out that the fear of taking action can be traced to a number of factors like lack of confidence, lack of knowledge, the fear of failure and so on.
Of course, for a first time investor, these concerns are genuine. It is okay to be afraid.
But you must also remember that there is no success possible without action. In fact, it is a known fact that action is an antidote to fear.
Also, the real estate industry is widely known for its guaranteed appreciation. Don’t you think stalling on decision making could make you miss out on great opportunities?
Nonetheless, we do not advise that you make an investment decision without doing your due diligence.
Mistake #5 – Being Dishonest about Budgets
You are probably wondering, why would anyone want to lie about their budget when searching for investment opportunities in the real estate market?
Well, first time investors are usually skeptical about disclosing their budget in a bid to have some privacy or protect themselves from opportunists. But on the contrary, they mostly end up limiting their options, and may most likely miss out on some fantastic opportunities which they are qualified for.
When engaging the services of an investment advisor, we recommend that you are honest about your budget. Professionals understand the value of confidentiality and you could also go a step further to confirm investment amounts before making financial commitments.
Mistake #6 – Not seeking Professional Advice
Having the right team of experts on your side can make all the difference between a real estate investment success and failure.
Knowing when and where to invest your money could make all the difference.
We encourage first-time investors to take advantage of our FREE investment advisory services. Our investment advisors are well experienced and willing to provide the support and guidance you need to guarantee a hitch-free investment experience.
In this post, we have highlighted some errors that are common with first-time real estate investors, with ways in which they can be avoided.
We would like to know your thoughts and entertain your questions in the comment section below.