Investing in real estate means that you’re playing with some seriously large amounts of money. As fantastic as an asset of that size can be, it also means that you can lose a lot if you’re not careful. You need to watch out for the most common financial hazards of the modern real estate market. Here are three of the most common pitfalls in real estate investing.
Investigate Every Property You Buy
Investigate – and be thorough about it, too. Properties can often have hidden problems that extend far beyond the first glance. Additionally, long-existing problems in a home can engender worse and worse issues in a chain reaction. So, you need to be absolutely sure what you’re dealing with whenever you purchase a property – knowing at least vaguely that the projected profits will far outweigh the amount of money that you sink into it. This is especially true for those who are looking to flip homes. Be sure to have a thorough checklist to go over with every house: bathroom, kitchen, electrical system, plumbing, air conditioning, heating, etc. The best way to accomplish this is with a competent and experienced home inspector.
Screen Your Tenants
Tenants, just like properties, can be either a fantastic source of consistent revenue or huge drain on your finances. The number one way to avoid bad tenants is to create an efficient and effective screening process when reviewing applications. Background and credit checks help you sort through your tenant pool to find the best ones. From those, you can ask to have interviews face-to-face (in person or over video call) and make phone calls to their references and past landlords. One trick that we have learned is to contact the landlord prior to their current one. Often times the current landlord may “fib” a bit to get a problem tenant off of their hands, contacting the previous landlord often will get the most accurate picture of how they are as a tenant. The quality of their housing history will go a long way in telling you the kind of tenant they will be.
Know the Local Market
Every neighborhood can very wildly, even within the same county. By knowing your area’s market well, you will know some of the specific trends and needs that can affect your purchases. Talk to real estate agents or other local buyers with more experience. Good old-fashioned networking really is the key! The internet is also an incredibly useful tool, providing innumerable untold local and national sites related to real estate. Find out where other buyers go to get relevant information and go there.
Real estate is a dynamic world that is constantly fluctuating. It presents a tantalizing reward while simultaneously offering a sizable risk. But don’t let this discourage you! If you take the proper precautions, and put in the effort required, you are much more likely to come out on top.
While there are certainly risks involved, getting involved with real estate investing can help you achieve your money goals! Click here to learn how!