Real estate investing can be one of the most profitable, stable, and reliable ways to invest. But if you make a big mistake when investing in real estate, you could quickly lose your entire investment.
So here are 5 of the biggest real estate investing mistakes you should watch for, and an infographic by Propcy Blog.
#1 Not Having Specific Investment Boundaries
Before you buy an investment property, you will need to do a great deal of research. While doing the research, define your overall investment strategy and set boundaries that serve as guidelines.
If you invest outside of the boundaries set by your investment plan, you are likely to buy properties that under perform or utterly fail as an investment. But if you stick to your plan, and revise your plan as you mature as an investor, you are more likely to purchase profitable investment properties.
#2 Borrowing Over 80% of the Property Cost
Most traditional mortgages used to finance an investment property will only finance up to 80% of the property’s cost. Borrowing more than 80% can result in over leveraging your portfolio, which in turn results in negative cash flow and severe financial complications.
#3 Poor Cash Flow Management
Failure to buy and manage properties that generate cash to pay all expenses and produce a healthy profit every year is a mistake that inevitably results in financial failure.
As with any business, managing cash flow is critical to success. A serious mistake in any area of real estate investing will negatively impact cash flow, and contribute toward failure of the business.
#4 Focusing All Your Investment in One Location
“Location, location, location” is the one real estate axiom that is never likely to change, and it’s crucially important to keep location in mind when buying investment properties.
“Diversity” in real estate investing is important also. Putting all your eggs in one basket, so to speak, can result in catastrophic failure. Market fluctuations can be regional, so if all your real estate investments are in one location, you may not withstand changes in local real estate markets.
#5 Not Checking Out The Neighborhood
To invest within your boundaries and buy profitable investment properties, you need to research geographic areas down to the neighborhood.
If you are investing on your own, without using local real estate experts, you’ll need to physically spend time in each neighborhood you may purchase property. And even if you use experts like wholesalers and real estate agents to find investment properties, you still need to understand the analysis of each neighborhood.
Graystone Investment Group
Graystone Investment Group is a real estate wholesaler. We have researched the Tampa Bay area neighborhood-by-neighborhood to determine where investments are likely to have the most most return on capital.
Unlike other wholesaling groups, we find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.