When we think about the mistakes made in real estate investment, we usually talk about them as if they are exclusive to new or inexperienced investors. However, it would be a mistake to assume that experienced investors don’t have their own missteps as well. Every investor should be on guard — striving to mitigate their risk and grow their portfolios.
But what are some of those common pitfalls? Whether you’ve been investing for one year or ten, these are mistakes you’ll want to steer clear of if you want to be a successful real estate investor.
Choosing the Wrong Markets
We all know it’s true: location is crucial to the success of a real estate investment. You can do everything right but still fail in the wrong market. What makes a good market? What makes a bad market? In many cases, it depends on your individual tolerance for risk and your own financial capabilities.
When looking for a solid market for investing in real estate, you must consider, namely:
- How does this market’s affordability compare to my own cost of living/income?
- What are the statistics for employment and population growth?
- Is the local economy diverse?
- How is the local real estate market moving?
Job and population growth both create real estate demand, particularly where rentals are concerned. If there is a healthy foundation at the core of a market, you create better long-term investing prospects. At the same time, be wary of the “hot” markets. These are typically primary markets and sometimes secondary “emerging” markets experiencing explosive growth and demand. While opportunities can be found here, they are not for every investor. Because of increased investor competition, rising property prices, and “hype,” it may be harder to break in or discern the true value and worthiness of the market.
Our financial capabilities vary. Just because you are told a market is hot and rife with opportunities doesn’t mean it’s the market for you to make a solid profit.
Failing to Plan
For all investors — turnkey included — planning is essential. Once we’ve purchased our first property or even when we’ve been in the game for a while, it is all-too-easy to fly by the seat of our pants. This is particularly true for turnkey investors, who are not as involved in the day-to-day operations.
Why do you need a plan?
Investing in real estate involves a lot of your hard-earned money. These aren’t decisions to make on impulse or gut feelings. When you plan, you’re able to smartly allocate your resources to accomplish real goals.
Every investor should have short and long-term plans that also involve a purpose. Why are you investing? What do you want out of it — as a whole and for individual properties? Knowing what you want and planning how to get there creates targeted, effective investing.
Be sure to check out: What Passive Investors Can Learn From Project Management!
Assuming What You Know
As we grow in investing experience, it’s easy to make assumptions. After all, you’ve been in the game for some time. Surely you know how this is going to go! Listen to us, real estate investors: never make assumptions. Build up your foundational knowledge and tackle every opportunity and investment with an eye for scrutiny.
Remember: past performance is not indicative of future success. Go into each investment opportunity with fresh eyes and evaluate it for what it is, not by your own track record.
Hiring the Wrong Team
Nothing is more important to a real estate investor’s career than their team. If you go at it solo, you can only achieve limited success. At some point, every investor looking to secure their financial freedom will need to rely on a team of experts.
This is why starting off turnkey — where every detail is covered by your dedicated team — is ideal. That said, it’s always essential to do your due diligence in that selection. Investigate your turnkey provider before you commit. Look to their track record, their way of doing business, and make the call for yourself.
Your turnkey partner is the essential component in a successful passive real estate investment portfolio. Prioritize not only selecting the right team but building a relationship of trust with them.
Avoid costly investment mistakes. Start with success with Memphis Invest.