The best lessons taught always involved making the wrong decisions. The same goes when investing in real estate. If you are a new real estate investor, chances are you are afraid to make mistakes as you don’t want to experience losing money. The good news is, numerous real estate investors and experts are very much generous when it comes to sharing the important lessons they learned over the years. Getting know what these costly errors are can help you better navigate real estate investing with fewer hassles.
Let’s say your plan is to buy a property that can provide you with a passive income. This can be a vacant land you intend to build a building over or a fixer-upper you can renovate and sell afterward. These are the four best and worst practices in investing in such real estate:
Never Skip a Land Survey
If there is a house or building on a property, chances are you will want an inspection before you close the deal. But what many newbie real estate investors forget is to have the property surveyed by a reliable land surveyor. The last thing you need is to buy a property not knowing where the property lines are.
You may know the person selling the property. But the does not mean they can give you accurate details about their property. They can provide vague information like the recent improvements they made or if the building is compliant with numerous regulations.
Land surveying is a must if it has been a few years since they did the last survey and if you are buying a mountainous land or wetland. You want to make sure it can suit your future needs, especially if you plan on erecting a building on the property. Don’t simply rely on the words of the seller and the real estate agent and make sure to check and walk the entire estate.
Do Shop for the Right Mortgage and Lender
Many real estate investors apply for a mortgage to finance their investment. It is crucial that you take a hard look at your finances to see how much you can realistically afford to buy. But then, many fail to find the right lender and mortgage to support their investing plans.
A good lender will understand your need, offer the right loan type, and won’t force you to take a mortgage you can’t afford. There is no point in sticking with the first lender you and find that will approve the mortgage. Go and shop for lenders, know your mortgage options and compare the offers.
Consider the mortgage type, its pros and cons, and the terms of the loan. Ask how long will you need to pay for the mortgage, how much is the monthly fee and how the interest rates work. Don’t settle on a single lender and shop for one as you would when shopping for your next shoes.
Avoid Buying the Most Beautiful and Expensive Real Estate on the Block
It is only natural to fall in love with the best property in your desired location. But one rookie mistake newbie investors make is to buy the best property for sale on the block. If you have the option to buy a cheap fixer-upper and a gorgeous house, pick the former.
There are times when the best properties in the block are overbuilt for the area. If comparable properties are not selling, this can actually drag the value of that house. But if you buy the cheaper alternative, flip the house and sell it, you can now match the price of nearby houses.
Remember that many things affect a real estate’s value. This is not limited to the location, the economy, the housing market, the age of the building, and the condition of the house. The updates and upgrades made, the size of the house, its usable space, and the neighborhood comps can also greatly influence its value.
Do Check Out Properties Other Than a Single-family House
You may think you can only afford a house for now, but that does not mean you should already ignore other types of property for sale. A wise investor would not limit their search to a specific building.
Sure, other types of properties may require a bigger investment. But it is crucial that you consider all the perks and risks. Don’t simply ignore other listings just because they don’t fit your conventional type.
There is no easy to be a successful real estate investor. But for starters, the best thing you can do is to learn the basics and avoid making the same mistakes that hundreds of other investors already made. You can use this list as your guide if you are serious about making for first real estate investment this year.