Every real estate investor goes through a learning period as they start out, when mistakes and missteps are quite common as you learn the ropes of your trade.
Although potentially leading to regrets and frustrations, mistakes made early in your property investment career can actually be a valuable learning experiences that help you avoid more significant issues later in life. Learning from these real estate errors can be helpful, rather than a hindrance.
Fifteen members of Forbes Real Estate Council weigh in on what mistakes most real estate investors make early in their careers and how these common mistakes can become valuable learning experiences.
As a new investor, it’s key to study your market and be patient before purchasing a deal. Real estate investing is exciting, but hurrying into a purchase can create problems that have a lasting impact on your investing dreams. Make sure you spend an incredible amount of time understanding your market conditions (rents, resale values, neighborhoods), and review hundreds of deals before buying one.
Not Knowing Your Market
The biggest mistake I see real estate investors make is not knowing their market. They rely on real estate agents, wholesalers or other investors to tell them what homes are worth. The real estate investor should know values better than anyone if they want to be successful and make good decisions.
Underestimating Renovation Costs
The most common mistake I have seen is underestimating the amount of dollars they will need to accomplish the renovation ideas they plan once they acquire an asset. The time for this is in due diligence, where you get several quotes from contractors on the various rehab projects that are needed. An investor needs to set up a budget and stick with it, holding those quotes in due diligence accountable.
Failing To Stick To The Budget
Sticking to a budget is key when investing in a property. When you are new to investing, it’s difficult to not be excited and emotional. Getting too emotionally invested can mean getting caught up in bidding wars, or overspending on renovations. Also, make sure to study the market before deciding on an investment property and be patient to wait for the right opportunity.