Pitfalls in Real Estate Investing

What are the most common mistakes when investing in real estate, and how can you avoid them?

Real estate is widely considered to be the best investment choice today. It offers the optimal combination of low and high risk, easy to get started depending on the niche investment method, management, and of course great returns. But it has its dangers too. Fortunately most of them can be avoided, if you have the right system, guidance and learn what to watch out for.

Here are seven frequent blunders and pitfalls in the real estate investing world to avoid…

1. The Get Rich Quick Mindset

Before you click the back button yes, real estate investing can deliver rapid increases in income and wealth. The problem is when new investors only care about the money, getting more money as fast as possible, and at any cost or sacrifice. Results can often be seen relatively quickly, but they won’t last without a long term vision. This leads investors to crash and burn, and in some cases mortgage and real estate fraud. It’s just not worth the consequences. Forget the monetary penalties. Prison sentences for these offenses can be far lengthier than for many other crimes. Do it right the first time.

2. Overpaying

Overpaying is a common mistake when exuberance, and competition is high. In reality this may be one of the least dangerous pitfalls, depending on other factors. But it can be costly. And this doesn’t just apply to the purchase price of a property. It applies to everything in the real estate investing process from resources used for sourcing properties, to borrowing costs, vendors providing due diligence services, repairs, materials to resale services.

3. Skimming Where You Shouldn’t

Skimming and being too cheap can actually wind up being even more devastating to your real estate investing business. It is almost invariably counterproductive. Negotiating well, getting deals, being frugal, and demanding value is one thing. Going to cheap can quickly result in self-sabotage with very serious financial consequences. This can certainly apply to real estate marketing. But the impact can be even swifter when it comes to skimping on your real estate education, market research, and due diligence process.

4. Poor Due Diligence

Forgoing property inspections, walkthroughs, professional appraisals, title searches, property insurance and title insurance can be catastrophic. Some try to get by without taking these measures. Sometimes they even get away with it on occasion. But any real estate investor investing on a regular basis is going to eventually run into the unforeseen. And it only takes one major unexpectancy to wipe out the gains made on several other properties.

5. Failure to Prepare

The truth is that there are somethings which real estate investors can’t control. You can’t control the weather, the national or global economy, and some of the other variables that have an impact on the real estate investing industry. But every real estate investor can control the degree to which they are prepared. Provided you are prepared these factors won’t bring the same risk as they would otherwise. Being prepared can include insurances, a plan B, multiple exit strategies, financial reserves and continued education.

6. Lack of a Plan

Real estate investing is no different than many other types of investments or businesses in the sense that failing to plan is simply planning to fail. You may change course later. Or even add to your plan. But without one you are almost guaranteed to go off course.

7. Lack of Action

Educating yourself is absolutely critical to safe, sustainable, and a profitable career investing in real estate. But all the knowledge in the universe is useless without action. In fact; one of the biggest pitfalls of new and even seasoned real estate investors is suffering from paralysis analysis. So learn, plan, get prepared, and take action.

I”ll See you at the closing table,

Marcel Umphery the “R.E.I. Successmaker”