If I read an article like this before I brought my Atlanta investment, I would have saved a lot of money and time. In this business or I guess any business, people will take advantage of you. They feel as if you're what I like to say a new jack. This business can be very profitable if you're educated about some common pitfalls. In fact, there's tons of free information for anybody to look up on the internet and research themselves. Below is a list of the most common mistakes made by real estate investors.
o Didn't Do Any Research- The smartest thing to do before buying an investment property is to find out the average number of days- houses sit on the market in that particular area. This will give you a good idea of how fast your property will sell if it's a flip. It's always good to make friends with a real estate agent. Agents can give you this information. Don't forget to drive past your comps, and get a feel for what the properties look like compared to yours.
o Too Many Upgrades- If you plan to use the property as a rental then there's no need to replace a whole lot. Generally the only money you should be putting into a buy and hold is carpet, paint, and any general repairs the property may need. When a homebuyer buys a home they love to see everything brand new and never touched. The worn property will not entice your buyer like it should. Wait until it's time to sell then put in the new faucets, updated light fixtures, and new outside paint.
o Paying Too Much For Rehab- Never go with the first repair estimate you get from a contractor. You should have at least 3 repair estimates from 3 different contractors. Pick the one who seems most qualified. Cheaper is not always better in this case. Try to find contractors that are familiar with investment property. They normally will be able to tell you what needs to be done to get the property in rent ready condition, or re-sell condition.
o Didn't Evaluate the Neighborhood- It is very important to evaluate the neighborhood that the investment property is located in. I say there are two types of neighborhoods. The neighborhood that you rent section 8 property, and the neighborhood that is considered bread and butter. Trying to sell a house in a section 8 neighborhood can be 10 x's harder than in a bread and butter neighborhood. Take notice of how people take care of their property. Also look for an abundant amount of [For Rent Signs]. Call the signs, and get a general idea of what property is renting for in that area.
o Didn't Make a Plane- Be sure to have plan A, B, C, and D if able. Get a clear understanding of what you will do if you can't rent your investment property in 1 month, 2 months, or 6 months. If you want to flip be sure to have a plan if your investment property doesn't sale as quick as you thought it would. It's o.k. to change the plans, but don't ever doubt yourself.
These are some of the most common mistakes that lead to failure. If you can avoid at least one of these mistakes then you have served yourself great justice. Many will fall victim, but with knowledge and dedication comes reward. Knowledge is very important while in this line of work. If you don't take the time to educate yourself- I guarantee you will waste a lot of time and money. Many people experimenting with real estate will probably fail simply because they haven't done their homework.
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