Real estate investing is fraught with pitfalls. While many landlords swear by their real estate investing business, there are others who struggle, finding it difficult to turn a profit.
If you want to invest in real estate, it’s important to plan ahead, and to avoid the following 5 real estate investing mistakes:
1. Believing that Real Estate Investing = Get Rich Quick
Even now, too many real estate investors think that they will get rich quick. Unfortunately for them, the reality is that, in most cases, real estate investing requires time, effort, and patience. Instead of viewing real estate as a scheme to make money quickly, you need to think of real estate investing as a business — or at least as a long-term investment strategy.
Treat your real estate investing efforts as a long-term effort, and you’ll see better results over time.
2. Failing to Keep Up with Maintenance and Repairs
It can be painful to pay money for maintenance and repairs on your property. After all, you’re in real estate to make money, not pay it out. However, maintenance is one of those areas in which prevention goes a long way. Pay to make sure your property is properly maintained, and you’ll have fewer repairs to deal with over time. Take care of repairs quickly, while they are still relatively small, and you can prevent even bigger problems.
When you keep your property up to specs on a regular basis, it costs less in the long run than having to overhaul everything due to a serious problem down the road. Plus, in many states, if you let your property fall into disrepair, your tenants can sue you — and that can get even more expensive for you.
3. Not Understanding Local Laws
Before you invest in any property, make sure you understand the local laws. If you’re planning on buying a home, and converting the basement into an apartment so that you can rent to two tenants/families instead of one, you need to double-check the zoning. If the area is zoned single-family only, your brilliant plan will come to nothing — or you’ll be fined when the city realizes what you’ve done.
Make sure you understand landlord regulations and tenant protections in your state and locality before you invest. You want an understand of how you will be required to run your operation, and what rights the tenant has.
4. Skipping the Background Checks
If you want a less painful landlord experience, it helps to screen your prospective clients. Make sure that you check into your potential tenants before you approve them. If your state allows it, consider running a credit check on your tenant. You can also require (in some states) an application fee in order to instantly weed out those who might not be serious. Ask for references, and be sure to call the people listed. A nightmare tenant can ruin the entire real estate investing experience for you, and it can also eat into your profits.
5. Going it Alone
Too many landlords think that they need to do everything themselves. While this might be fine if you live near the rental property, and you don’t have very many units, if you plan to expand your real estate empire, or if you live in a different town, it might make more sense to hire some help.
Whether you just hire someone to maintain the yard at a rental home, or whether you go all-out and hire a management company, you can actually improve your profitability with a little help. You can focus on growing your investment, while others take care of the mundane tasks associated with managing a property.
Carefully think about what you want to accomplish with your real estate investing business, and then get the help you need to properly manage your investment. Over time, you’ll have fewer headaches, and be more likely to make more money.