Some beginning real estate investors make the mistake of listening to "quick and easy" tips on making money in real estate. But the bottom line is those who call themselves 'specialists' may be a specialist from a completely different perspective than that of an investor.
Real estate agents and financiers have a different background than those who are investing. The media forecasts also have a different more theoretical approach to real estate. The best approach is to do your homework. Ask for help. And avoid the following rookie mistakes.
Putting Too Much Down
Those in the biz call it an OPM business: other people's money business. Many beginners think that if they put a lot of money down, they will make more money in the end.
The truth is, it's better to have a reserve of cash in case something happens with the house that needs to be remedied. Or, if you can use the extra cash to improve the house, you could be increasing your income by a lot more than with your cash sitting in a down payment.
Getting Too Emotional
Emotions are good when it comes to love and family, but when it comes to buying real estate, it's best to keep your emotions out of the picture. Rookie home buyers literally fall in love with properties and then make poor decisions because their emotions get the better of them.
They look beyond the collapsing roof and broken pipes to the beautiful rose bushes and light-filled porch. When it comes to buying a house, let the mind rule, and not the heart.
No Exit Strategy
You're purchasing a very large responsibility when it comes to buying a house. You need to have some backup plans in place. Not just one exit plan, but multiple.
If you plan to flip a house, you need to be prepared for what might happen if that flip doesn't happen as fast as you had hoped. You need to be prepared to have a house on your hands. Be prepared to rent, lease, or even seller finance.
Guess
Of course, investing in anything requires a kind of imaginative guesswork, but if you're not versed in the realities of real estate, making quick guesses about the future is a poor beginning to a very large commitment.You might even be making educated guesses based on listening and reading media, but if you don't have experience with actual buying and selling, you could be making theoretical decisions that might not hold up in the practical world.
Go it Alone
It's good to have confidence, but it can hurt you in the end if you don't learn to depend on the knowledge of others who have actual experience. Today's generation is a generation of DIY mentality.
Everyone thinks they can do things alone, but taking that risk when it comes to buying a house could mean a fall in the end.
When something exists in a theory, it can seem simple and promising. And that's good. Imagination is powerful and leads us to take risks and make moves.
But those decisions need to be tempered by logical choices that will prevent you from spending a lot of money on a risky investment that could lead you down the river without a paddle.
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