Investing in real estate is a great way to build wealth and secure your financial future. Whether you are looking to own multiple apartments or flip houses, there are a few common mistakes that new investors make. If you are looking to get into real estate investing, try to avoid the following mistakes.
Not knowing enough about the area
When investing in real estate, it is expected for an investor to want to know as much information about a property as possible. During your research you should be gathering information about the area where a property is located, this is equally as important. The type of information an investor will want on a specific market will vary depending on the type of investor you are looking to be. Determine the demographics, transportation, foot/vehicle traffic, and demand of an area to see if it makes sense for your portfolio.
Just because the price is low, it doesn’t mean it’s a good deal
Not every property is worth investing in. Underlying conditions of the property, such as structural problems, can become expensive over time and make the investment a bad one. It is crucial as an investor that you invest in thorough property inspections. Conducting thorough inspections will help you understand what you are buying and protect you from unexpected issues down the line. Trying to save money on inspections isn’t advised.
Not saving in case of an emergency
Buying property is an asset that must be maintained. It is recommended that an investor save at least 15-20% of their profit in case of an emergency. Whether there are repairs that need to be made or you find yourself without a tenant and must cover the rent, you want to be prepared for unexpected problems and expenses.
Having investment property in your personal name and being underinsured
There are many benefits to forming a business for your real estate investments. Forming a business can provide many benefits to the investor such as liability protection and tax savings and is typically one of the first steps an investor will take when deciding to invest in real estate. Being underinsured…simply don’t do it! It is not worth saving a couple dollars a year to end up spending thousands down the line.
Being a lazy/bad landlord
Just like anything in life, you get what you put into it. Passive income does not mean you get to forget about your responsibilities as a landlord. You must keep up with the property or small problems will turn into big ones, in no time. It also means, when it is time to sell, you will get minimal profits as you did not keep up the property.
Deciding to invest in real estate is a decision that should be researched well, and you should understand what you are getting yourself into. Working with a qualified real estate team, like the DV Real Estate Group, will help set you up for success when investing in real estate. DV Real Estate Group’s team of dedicated NJ real estate agents specializes in working with real estate investors in and around Northern NJ. Our team prides itself on helping investors find investment properties and becoming their partner for all their real estate investment needs.