Real Estate Investment: The Traps You Must Avoid

As most people will tell you, real estate is one of those investments that should be a winner every time. But on closer inspection, the truth is somewhat different. Take a look at the financial crisis of 2008, caused by real estate and subprime mortgages, and you can see where some of the problems lie. And even today - almost ten years after the event - we are still feeling the effects.

Predatory lending, foreclosures, the rise of the need for homeowner assistance - they are all incredibly concerning trends for anyone looking to get involved with property investment and real estate.

However, the secrets to success in any industry or sector are to know what you are up against. And in this brief guide, we’re going to go through some of the common traps that rookies to the real estate scene often find themselves in. With a little knowledge, you should be able to notice if your investment is turning south far quicker, and with a little luck, you can go on to avoid catastrophe.

Emotional attachments

The first big no-no for newbie property investors is to ensure your emotions are kept well out of the picture. If you want to make money in real estate, you can’t afford to fall in love with a home, commercial building, or industrial development. You’ll end up paying over the odds, and you will end up tailoring that property to your wishes - not those of the general market. In short, if you aren’t thinking in financial terms, you shouldn’t be in the real estate game.

No mentors

Buying property is one of the most expensive investments you will make. And if you decide to get started alone, it could end up being one of the most expensive mistakes you will make. As a newcomer to real estate investment, it’s worth spending time seeking out advice from more experienced investors - the people who know what they are doing. You can start by following people like Nicolas Livsit on Twitter, before exploring your local investment scene and making contact with people with experience. Having a mentor to help you progress is important for many aspects of life, but even more so when you consider the sheer cost of real estate investing.

Picking the rose between two thorns

The location is everything when it comes to investing in property. Let’s say you spot an incredible home, but it is smack bang in the middle of a less than desirable area. Sure, you might think the property is fantastic, and you spot an opportunity to make some improvements and sell on for a profit. The trouble is, a home’s value is almost always based primarily on its zip code. In most cases, there will be a ceiling of value dictated by the other properties in that area, so any money you spend might as well be poured down the drain. Only invest in real estate with location - not the glamour of the actual home - taken into account.

We hope this helps you be aware of some of the significant problems many first-time real estate investors face. Good luck!

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