So you are thinking about investing in real estate. Real estate can be a great way to earn money quickly by flipping homes, or over a longer period of time by buying and renting out those properties. However there are some common mistakes that investment novices can make. Here are the top three:
Not performing your due diligence. This is more than just an inspection of the property, although that’s essential. (Can you say, "deferred maintenance costs"?) It’s also a thorough investigation of your area’s current rental market, says Gerald Marsden, a New York-based CPA who specializes in investment real estate. What are the vacancy rates and average rents for comparable units? What’s the average age of the rental housing stock? How is the neighborhood zoned? What are the government regulations about rental properties? Has City Hall approved new rental complexes nearby?
Forgetting the rule of home improvements. It will always take three times the money and twice as long as you estimate to get a unit ready to rent. Or is that twice the money and three times longer? Either way, you need to build that extra cost into your expenses, Anthony says.
It is so important to plan and budget and expect the unexpected delays and speed bumps that come with real estate investing. But, like many things you will reap great benefits from your hard work if you are wise and avoid these common mistakes.
By Philippe Volo
Compare Your Loans Contributing Editor
