Common Mistakes of First Time Investors

First Time Real Estate Investing? Avoid These Common Beginners Mistakes 

Real estate investing as a beginner can be challenging. There are a lot of risks and learning curves to overcome. In this insightful beginner’s investment quick guide, the points discussed will help you understand what to say “no” to and what should be regarded as false reassurances. 

Lesson 1 – Assess the Property & Location

Before investing in a property, it is critical to assess the property. Will the property be desirable for a family, a couple, or an individual to reside in?

The best thing for you to start out with is to first work on finding a property that has appeal to buyers based on the market the property is located in. More importantly, you must do their research and avoid purchasing property with risks attached to it, such as liens, liabilities, or any slew of legal issues. By doing the research before investing in a property, it can save you from many future headaches. Upscale areas with notable reputations will most certainly be more costly to invest in, therefore it is wise to consider areas that are more newly developed or middle-class where figures stack up and provide more value for less money. You need to be careful to avoid making property transactions with individuals or companies who have a reputation for selling properties that have many outdated features, selling deserted homes, or selling properties with the knowledge that they are located in an area where illegal activities like drug trafficking take place. While some may have an interest in these types of properties for reasons such as being pioneers in developing an up and coming neighborhood, it’s best to avoid these areas as a beginner real estate investor. Advanced investors have an advantage due to years of experience in navigating the risks and challenges that come with these high-risk properties. However, since you’re new to investing, it is advisable to invest in the safest areas offered. 

Lesson 2 – Exercise Caution

“Can I truly afford my property of choice?”

Although this might seem like a “given”, before you purchase a property, you should take a strong and critical look at your finances. If there is any waiver of a doubt, it is imperative to review your finances as to what it would take in order to afford the purchase.  If this challenge seems daunting, reaching out to a trusted and reputable financial advisor to help review your finances with you so that you can make an educated decision.

While most individuals and companies that sell real estate are ethical and incredible at what they do, there are some who are not. Commissions come in huge packages that can sometimes incentivize a less-than-stellar individual or company to push a sale that could end up being a disastrous and financially devastating decision for the buyer. For those that are motivated by profits only, there are many ways of creatively getting first-time investors to agree with a flawed offer that is not in the best interests of the buyer. Some may even go as far as to convince a buyer that they can afford a particular property when in fact, it is more likely to lead them to bankruptcy. This became so prevalent it spurred on a great Recession in 2008. Thankfully, a lot of laws and protections were put in place but that doesn’t mean you don’t have to be diligent.

After reviewing your finances and it is found that investing in the property is unfeasible, just turn down the offer. There is something to be said about trusting your gut as well; if the purchasing a certain property induces feelings of dread or uncertainty in a negative way, it’s best to keep looking. Being swept away by a charismatic seller should not cloud judgment, make the decision based on the numbers because the numbers never lie and rarely does intuition. However, exercising caution does not mean for you to stop pursuing your goal in becoming a real estate investor, quite the contrary. Exercising this caution allows beginner real estate investors such as yourself to achieve your goals by learning and developing the skills and knowledge necessary to be a successful investor. 

Lesson 3 – Ask Questions, Ask for Help

A basic rule all people need to follow in any area in life is to ask questions; ask even more when beginning in the lucrative area of real estate investing. You’ll need to be comfortable with probing the seller. One question that can help a new investor avoid headaches and hassles is to ask the person who is selling the property if they would invest in the property they are offering. Under the condition that the answer is yes, ask a follow-up question such as, “why would you invest in this property?” This pushes the seller to think about the reasons they would want to purchase or why they purchased the property in the first place. Be sure to ask them what the pros and cons are and get a feel for their unique story. If something just seems “off” or the seller just answers in canned soundbites that do not seem like viable answers, it may be time to reconsider if the investment is a wise decision. On the other hand, if the seller provides a list of genuinely thought out answers with pros and cons, it may very well be a property worth investing in, and if you do decide to take the leap you’ll feel much better about it. It’s your money, it is a risk, so never shy from treating your business like a business. 

By following these simple steps, you’ll quickly morph from a real estate beginner to a savvy investor. Good luck and let us know how you do on your first sale, we LOVE newbies!! (Its kind-of what we live for around here 🙂 )

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