We are all prone to making mistakes when it comes to real estate investing. The occasional oversight is inevitable. However, make sure to learn your lesson the first time around. Below are some of the critical errors that a long-term real estate investor can make.
Real Estate Investing Mistake: Buying at a Premium
Some opportunities look good, but they attract investors to pay premium bucks. Buying properties at a premium might be lucrative to short-term flippers who deal in volatile, lucrative markets. However, this strategy can have its pitfalls for long-term buy and hold investors. The strategy requires large amounts of liquidity, and these large amounts can severely debilitate a long-term investor’s capital reserves.
Many investors can become overly hopeful when a property offers the possibility of rental income. This leads to hyper-inflated appraisals that do not truly reflect the actual value of the property in its current state. This fallacious strategy has been known to be the root cause of financial ruin for many buy and hold investors.
Instead, industry experts recommend finding potential rental properties that are listed below their fair market value. These properties will give the investor room to renovate the property, thereby increasing rental potential and overall appraisal value.
Mismanaging Responsibilities as a Landlord
The responsibilities of a landlord are quite demanding for the average investor to take on by themselves. These responsibilities include property maintenance, maintaining positive relationships with tenants, and managing financials.
A majority of buy and hold investors mistakenly downplay the importance of landlord duties. If the pressing demands of a landlord are too many to handle, they can severely impact the profitability and the value of the property. In certain situations, it is better for the investor to consult a professional third party to carry out the landlord duties.
Avoid These Common Pitfalls
Investing in real estate can make someone wealthy. However, it does not mean that buy and hold investors do not make mistakes at times. If you can avoid these three common blunders that investors make, then you will save yourself time and money.