Every investor was at one time a newbie real estate investor, someone who is just stepping out into the world of real estate. Mistakes are made by each of them, some of them detrimental, some of them not so detrimental, and all of them lessons to learn in order to be successful in this rewarding career.
Here are the top 5 mistakes that newbie real estate investors make:
1. Under-estimating the Market
Most newbie real estate investors believe that they can get something for nothing, especially in this economy. They think that most sellers will willingly give them the property for next to nothing. Does this happen? Do seller’s give their property away? Rarely.
Sellers are selling because they want to: a.) sell, and b.) earn money. A working knowledge of the value of a property is critical as opposed to the “what I want it for” value of the property. A professional real estate consultant can assist a newbie in determining fair market value for a property, and can then determine if that property is right for them. In addition, if a property is on the market at a “great deal” price, then there will be multiple offers on it, which means the best offer wins. Many newbie real estate investors lose out on several properties before they learn this lesson.
2. Neglecting to get finances in order
A fatal fall for many newbie real estate investors is that they do not get their finances in order before making an offer. This includes investors who are purchasing cash – the closing company wants to know where your cash came from, so it must be established in a bank account.
3. Under-estimating Cost of Repairs/Updates
A big pitfall for a newbie is that they do not have a comprehensive understanding of repair and updating costs, or worse, think they can do it themselves. The result? Loss of time to rent or sell the property and going over budget. The best way to fix this mistake is to acquire three quotes from different contractors. The newbie will learn more about repairs, updates and costs.
4. Not using a licensed real estate agent
By hiring a trustworthy, professional realtor, newbie real estate investors can avoid many costly mistakes. A professional can assure the contracts are completed correctly, that all the title work, paperwork and phone calls are made in order to complete the transaction. The realtor can also assist in watching the market for hot properties that will make good investments for the newbie and advise them on a variety of negotiating techniques.
5. Act too slowly in purchasing
It is difficult for newbie real estate investors to act quickly, because they do not have the experience or knowledge yet to back themselves up. What often happens is they lose out on great investment properties because they do not “pull the trigger” to make the decision to buy. The loss of potential income is impossible to calculate from this mistake. How to avoid it? Become knowledgeable and confident so good decisions can be made in haste.
The best way to become confident quickly and grow your business more quickly is by finding someone who is where you want to be and getting as close to them as you can. Having access to someone who has already done what you want to do is invaluable.
I do work personally with some students, and I’ll admit the investment is not small, but the results are well worth the effort. If you’d like to find out more, go to my page on investor mentoring.
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