Skip to Content

5 Common Investment Errors That Diminish a Good Deal

Real estate investor at his laptop appearing stressed over avoidable investment errorsWhen it comes to finding the best real estate deals, even tiny blunders can cost investors a lot of money. Investors can only get great deals if they use their knowledge and skills to keep things moving. Otherwise, real estate transactions can quickly go wrong. There are five specific ways that real estate investors can accidentally shoot themselves in the foot, turning what could have been a great deal into an average one. Identifying these errors beforehand allows Hanover County real estate investors to avoid them eventually.

Lack of a Well-Defined Plan

One of the biggest investment errors a real estate investor can make is to assume that planning is not essential before buying investment properties. Amateur investors sometimes think that finding a great deal on a rental house is the most critical component of the process. But that can quickly become an issue if you aren’t sure what to do with that great deal before you ever make an offer. Instead, the best approach is to figure out your strategy and investment model and then look for properties that fit. If you don’t, you might end up with a property that seemed like a good deal at first, but in fact, it doesn’t do much to help you reach your financial targets.

Making Emotional Decisions

Letting emotions dictate your investing decisions is an investment error that can quickly cost you a lot of money, aside from failing to prepare. Some rental property owners seek a house until they fall in love with it. Then, they let their love for the house ruin their investing strategy. When you decide to have a certain property, you’ll likely miss important warning signs or pay too much. Investing in real estate should be all about the numbers, and keeping to the figures you know will help you optimize your earning potential.

Insufficient Research

There is no doubt that the best way to learn is through experience. However, learning from experience can be a recipe for disaster when it comes to investing in rental properties. To ensure that a great deal isn’t genuinely too good to be true, do your homework! Real estate investors must not only understand each market in which they invest, but they must also understand everything they can about a property before buying it. This encompasses the current and prospective market conditions as well as how the house is. Assuming a home will go up in value without doing any research is an investment error that can turn a great deal into an average one.

Inaccurate Cash Flow Projections

Purchasing and leasing a rental property consumes time and substantial cash flow. One expensive error that real estate investors often make is thinking that the property they buy will immediately generate an income. But most properties have one-time fees that you have to pay before you acquire your first rent check. Some costs are upkeep and repair fees, mortgage payments, taxes, insurance, condo or homeowner group dues, and property management fees. If an investor is not adequately prepared for such fees, a great deal could quickly turn into a huge financial burden.

Neglecting the Needs of Tenants

Finally, it’s important not to overlook the needs of the renters to whom you plan to market your property. Different renter demographics have different wants and needs. For illustration, renters with young families are often seeking a home near good schools, outdoor play areas, and low crime rates. On the flip side, college students and young professionals tend to prefer rental homes with close access to public transit, social amenities, and cultural venues. To ensure that your investment property is profitable, try to look for and buy a property that best fits the kind of renters in your vicinity.

The positive side is that you can easily avoid these types of expensive investment traps if you know what to look out for and plan ahead. So, when you find that next great deal, you’ll be ready to go after it. 

 

Real Property Management Richmond Metro can give you that information and help you plan. Call us at 804-823-8882 or contact us online today!

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.

The Neighborly Done Right Promise

The Neighborly Done Right Promise ® delivered by Real Property Management, a proud Neighborly company

When it comes to finding the right property manager for your investment property, you want to know that they stand behind their work and get the job done right – the first time. At Real Property Management we have the expertise, technology, and systems to manage your property the right way. We work hard to optimize your return on investment while preserving your asset and giving you peace of mind. Our highly trained and skilled team works hard so you can be sure your property's management will be Done Right.

Canada excluded. Services performed by independently owned and operated franchises.

See Full Details