Part 1: Don’t Make These Newbie Mistakes When Investing in Real Estate

Guess what? Everyone makes mistakes when they start investing in real estate. EVERYONE. Most of the time, it’s not the end of the world when it happens, although I have met a few would-be investors who screwed up big time and had to do some major damage control. But even though everyone makes errors, they’re still something you want to avoid. In this two-part post, I’m going to share 10 of the most common mistakes that befall newbie investors, and what you can do to prevent yourself from joining that club. Here are the first 5:

1. Failing to thoroughly research a property. If you thought homework was an exhausting pain when you were a kid, I hate to break it you, but homework is in store for you as a real estate investor, too. Doing your due diligence takes time, effort, and a lot of dedication, but it is vital that you do it, and do it right. Visiting the home in person, checking out the neighborhood, running the numbers - you should be doing all this and more. Not being thorough can cause you undue stress and possibly cost you thousands.
2. Not considering ALL the expenses. Here’s another error that newbies often make. When they’re tallying the expenses associated with a property, they leave one (or more) out. There are lots of costs associated with owning a rental property, and some are less obvious. Make sure you consider every cost you know you’ll incur over the year (and even the ones you may come across) when running your numbers.
3. Investing based on personal preferences. Some beginners walk into a house and let their own emotions and preferences take over. They don’t like the flooring, or they hate the color on the walls. But does this mean it’s not worth considering as an investment? Absolutely not! Just because it’s not YOUR taste, doesn’t mean it’s not suitable as a rental property. Don’t make the mistake of walking away from a good deal just because you wouldn’t personally want to live there.
4. Not having cash reserves. Rental properties are a great way to make money, but they can eat up plenty of cash as well. That’s why it’s critical you have an emergency fund to cover those times when something unexpected happens at the property - the furnace goes out, the plumbing needs to be replaced, or whatever big ticket item comes due. If you don’t have the cash on hand, you’ll have to borrow, and this will cost you more money in the long run.
5. Trying to do everything on your own. Real estate investing is a team effort, but many newbies think they can do everything solo. Most often, it quickly becomes apparent that they cannot, but by then, the hours spent toiling away, the lost time and money, and the stress associated with it all has already taken its toll. Don’t make the mistake of trying to shoulder everything on you own.

I’ve seen each of these time and again, and it pains me every time. Fortunately, like most mistakes, they’re completely avoidable! Don’t forget to check back for Part 2 to see the other 5 big newbie mistakes!