Looking to invest in real estate?
You’ve probably heard that the first real estate investment you make is the most difficult. It’s true.
The tragedy of it all is that you don’t know enough yet to make shrewd decisions, and you still need to move forward and get started if you’re going to become a pro. Here are some tips for real estate investing for beginners to help you avoid silly mistakes.
- Bad Financing
This is probably the most common mistakes made by rookie investors. More real estate investors have lost money or gone out of business due to bad financing than any other mistake. If a financing option involves any or all of the following – high interest rates, adjustable interest rates, high monthly payments, personal recourse, and balloon payment, then it is a bad deal for a beginner. While you may not be able to avoid all these, make sure to bargain when taking out a loan in order to increase your chances of success. For example, you might want to go with a longer repayment period instead of incurring higher interest rates.
- Bad Location
Location is a big deal in real estate as it has a huge bearing on the value of the property. The businesses and people who will rent the property from you, usually consider the location first. Other criteria such as lot and house come later. Before making a purchase, identify the worst and best locations in your area of interest. While you can still make money in a bad location, such investments are best left to seasoned pros.
- Underestimating Repair Costs
Repair costs can add up. They can make an erstwhile good investment a bad one. At some point, you are bound to underestimate repair costs of a property you wish to purchase. While this is unavoidable, you want to avoid huge cost overruns with the potential of getting you into financial problems. To avoid making such mistakes, you want to consult a professional to do the cost estimates for you. Contractors can come in handy especially if you8’ll be giving the work to do the repairs. Do not shy away from paying them for this service as they could save you a ton of cash.
- Misjudging the Rent or Resale Value
If you are investing in real estate, the end game must be to rent out the property or sell it off for a profit. For this reason, you number one job as the investor is to understand how your customers make their buying decisions. You need to evaluate the full value potential of a property before making a purchase. This helps determine whether the property will turn a profit. As a beginner, you will need to reduce your target market to a small, manageable area. Check out all transactions In the area using tools such as Zillow, MLS and your local tax assessor. You should also consider hiring professionals or taking a course on valuation at the local Associate of Realtors.
- Making Decisions Based on Emotions
You should never let your emotions drive your decision making. You must back your purchase with cold, hard analysis. It’s not enough to fall in love with a property. The numbers have to make sense if you’re buying the home as an investment. Consider the location, neighborhood, housing type and quality of construction before spending your hard-earned money.
In your quest for the perfect property, make sure to check out some Toronto condos. You could get an excellent deal.