Real estate investment is a most lucrative investment option and is a choice of all the investors who are looking for the profit along with the security. This kind of investment requires some practice without which many investors can do mistakes. The risks and profit depend greatly on factors such as market conditions, mortgage terms and even the location of your property. It is very important for all investors whether they are new or professionals to watch out for the common mistakes that can cause disasters.
Knowing of stake is very important thing. Investors should not make hasty decisions and buy a property without knowing what's at stake. They should be clear in what they are expecting from investment and should think "what kind of property am I looking for?" "What should I do with my property?" and so on. Unfortunately, most people believe that the investing in real estate is only belongs to rich people and they end up with buying property because they have resources and they like the outlook of the building. But there is a plenty of investors who belong to the middle income groups and have got rich in no time because of high profits they made in realty.
Another common mistake made by the investors is to sell a property too fast. Almost everyone would tend to sell their property when real estate market is hot but that may not always be the wise thing to do. You need to take into account other factors such as equity and tax benefits.
Many investors think that there's no way they can lose money in real estate and all would love to believe so, but unfortunately there are some ways that leads to disaster. The fact is realty investments require careful planning and research. And this kind of investment is clearly not for those who require immediate profit.
Ignoring transaction cost is another common mistake. When investors brag about their real estate profit they leave out the transaction cost. Ignoring the transaction cost in real estate is far greater mistake than in bonds or stocks.
Ignoring capital expenditures can also leads to the disaster, when discussing their cash flow investors usually ignore the capital expenditure like replacing a roof or furnace and say itís just a one-time expenditure.
Another big mistake is ignoring the value of your time because investing money in real estate is a very time consuming long term project. Buying, renovating and selling properties take additional time.
Ignorance of risk is another mistake. In real estate, investors often ignore the readily available risk-management tools like fixed-rate mortgages, non-recourse mortgages, avoidance of balloon payments, warranty deeds, and so on.
And the last but not the least mistake could be a too lenient behavior with employees and tenants.
Whether you are buying your dream home or just a property to keep your profits going, you need to avoid these mistakes that can wreck your financial planning and keep you from reaping profits in this highly lucrative real estate market.