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Common Mistakes in Real Estate Investment

Written by Scott M. Guzman

Real Estate investors that are new to the field often face day-to-day difficulties in a slow real estate market. However, there are these common mistakes that reel the investors to be in an uphill battle.

Lack of Research

Before any investors buy a real estate property; they compare various properties, ask a lot of questions, and determine whether the property is worth the property value. The investigation or audit of a potential investment or product to confirm the facts should be conscientious.

Here is an example of questions that an investor should ask regarding the real estate property:

  • Why is the property being sold?
  • What is new in the property, and what are those needed to be replaced?
  • In what method did the owner paid for the property, and when?
  • Is the residing area of the property problematic, is it a flood zone, or known for a radon or termite problems?
  • Is the property built in a commercial area, will there be long-term constructions in the near future?

Having Poor Financing

Though the real estate cycle has been characterized by a rapid escalation of asset prices followed by a contraction. When no more investors are willing to buy the property at an elevated price, the bubble will deflate.

However, there is still an exotic mortgage, a type of home loan that offers a monthly payment at a lower price in the first few years. Although, this is considered to be a high-risk investment because of the terms and the higher future payments.

Unfortunately, some buyers fixed into an adjustable or variable loan or interest-only loans that have an increasing interest rate. Before securing a mortgage, make sure that you have a financial flexibility or a backup plan.

Doing Everything on Your Own

Some investors think that they know it all, or they can make a deal of a real estate transaction on their own. Real estate investors should approach every possible resource and make connections with real estate experts. These real estate experts should have the initiative to alert the investor to any mistakes in the property or neighborhood.

Overpaying

Looking for the right real estate property can be a time-consuming and exhausting process. When a prospective buyer finds a house that can meet his or her satisfaction, the buyer will anxiously bid to the seller.

There is a downside with anxious buyers, they tend to overbid on properties. This can end up too much debt, and higher payments which may result to long recoupment of the investment.

Underestimating Expenses

Owning a house is more than just the mortgage payment. There are maintenance expenses, costs that are associated with house furnishing, structural changes and renovation, and other expenses like insurance and property taxes.

List all the monthly costs that are associated with the maintenance of the property before making a bid on one.

Real estate investment is such a tricky path, many of the difficulties each investor may face can be avoided with due diligence and proper planning before signing any contract or making any bid.