If you are new to the real estate investment industry, the best piece of advice we can give you is to know what you don’t know. Being humble with regards to your relevant experience and knowledge base is the ideal mindset to have for those starting off their real estate investment careers. It is a nuanced and inherently diverse profession riddled with complexities and untold unpredictability that give even the most experienced of investors issues. Yes, there is a steep learning curve, but the good news is that you can significantly shorten the time it takes you to become proficient by learning from some of the most common missteps others make so you don’t have to learn those lessons the hard way. Here is a closer look at the most prevailing pitfalls among new investors to help you get started out on a positive note.
“If you fail to plan, plan to fail”
Spending a small fortune on a property only to realize it is a time and money suck is not the position you want to find yourself in—no matter what your experience level or financial status. When the market is active, it can be challenging to resist pulling the trigger on what appears at face value to be a steal—but it is essential that you do your homework first. Prior to obtaining financing or exhausting your cash reserves, you have to first establish a detailed investment strategy. What type of property are you seeking? Single family? Multi-Family? Settle on a balanced portfolio goal and then conduct a thorough search for properties that align with these long-term objectives. Think of real estate investing as a similar process of buying a new car. The majority of customers compare a number of different makes and models and ask tons of questions, all in an attempt to justify their considerable investment. The due diligence process associated with real estate investing should be considerably more thorough. Find out everything you can about the neighborhood, flood issues, why the owner is selling, what the home sold for last time—any and all questions related to the ultimate revenue-generating potential of the property should be asked and answered.
“Never let your emotions overpower your intelligence.”
It is dangerously easy to become emotionally attached to an investment project. “Going with your gut” and trusting your instincts are sometimes the best play for real estate investors, but they should never cloud your judgment—especially in situations where there is hard, incontrovertible evidence indicating that your gut instinct was wrong. In today’s technologically-advanced society, there is a wealth of information for you to analyze and use to inform your investment strategy. From market and neighborhood statistics to rental and cash flow forecasts, the data you need to prevent an uninformed decision is literally just a click away—don’t neglect it. Use these resources to stay grounded and ensure that your investment strategy is premised on solid information in order to mitigate risk and optimize your return on investment.
“Alone we can do so little; together we can do so much.”
One of the most important early lessons real estate investors have to learn is that the business is at its core a team effort. The ability to establish lasting mutually beneficial relationships and leveraging the specialized knowledge and resources of similarly-minded entities is a key component of sustainable growth and success when it comes to the real estate investment industry. A knowledgeable real estate agent will assist you in locating a profitable asset at a below-market price point. An outstanding funding partner—like Express Capital Financing—will ensure you have the money you need when you need it in order to close on all of the promising deals you find. The list goes on—from lawyers and contractors to interior decorators and architects—and the bigger your professional network is, the more ideally-positioned you are to grow and scale your investment business.