Summer is peak real estate season. As you look into buying a new home you may be considering keeping your old one as part of your real estate portfolio. This can be a great way to build your portfolio, but if this is your first entry into real estate investing there are a few things to keep your eye out for.
Here are 5 common mistakes to avoid as a new real estate investor:
Not Valuing Your Time
Being a property manager may sound easy — until you start doing it. Many new real estate investors think they can go it alone and refuse to hire a property manager in an effort to save money. But when the midnight emergency calls come in, you’ll find yourself singing a different tune. If you plan to maintain a full-time job in addition to starting out as a real estate investor it is crucial you hire a property manager. Your time is valuable, so don’t waste it.
As stated above it may seem like a good idea to self-manage, but when the requests start flowing in and you aren’t able to respond right away you’ll feel overwhelmed and your tenants will be upset. Tenants don’t like to be ignored, they’re tenants because they enjoy not being responsible for fixing things when they break, among other reasons. Commit to being responsive to your tenants and you’re on the way to smooth sailing. You can even set up an auto response saying “thank you for contacting us, your request has been received and you will hear from us shortly” to help your clients feel heard. Here are a few other tips to keep your tenants happy.
Expecting Short Term Gains
Real estate investing is a long term play, short term gains are for flippers. Take a look at our case study to see how the math works out. As a real estate investor, you should have monthly cash flow from rents, but you won’t see the real gains for several years. If you start out expecting short-term gains you may mistakenly sell a property too soon or quit before you’ve had a chance to get ahead.
Getting Bad Financing
If you’re unable to purchase properties with cash, you need to ensure you use proper financing. Bad financing, such as an adjustable rate mortgage, can be the downfall of your real estate empire. Secure financing through a reputable, licensed mortgage banker or broker. If you stumble across financing that sounds too good to be true, it likely is. Ask plenty of questions and get a clear picture of what your monthly payment will look like before signing on the dotted line.
Not Doing the Math
Properties don’t maintain themselves, and there are a handful of expenses you need to keep in mind before entering into the real estate investment world. For instance, what happens when your property is vacant for a few months, or you need to replace the appliances, the carpets, or fixed a clogged toilet. It’s hard to ignore the obvious cost of a mortgage payment and potential HOA, but there are plenty of expenses often forgotten. Forgetting these can cripple your cash flow down the line.
Becoming a real estate investor can put you on a path to a successful and lucrative career, but these mistakes can halt your progress. Avoid making common investing mistakes by hiring a property manager. Contact us today to learn about our pricing and services.