When the market is slow, real estate investors can still earn money but you must be cautious on what homes you buy. First time home buyers and investors need to be aware of some of the common mistakes buyers make and try to avoid those with purchasing homes. These five common mistakes can cost you big in the end if you’re not aware of them up front. Take these five tips and keep them in mind as you navigate the real estate investment waters.
Do Your Research
Whether you’re buying a new car or a new television, you typically visit the Internet to scout out the reviews, prices, and information on those models. Sometimes this can take days to really feel confident in the purchase you want to make before you ever spend a dime. The same research, and more, should go into your home purchasing. This is important no matter what type of real estate you plan on buying, whether it’s a home for you to live in, land to build on, or a house that you want to flip for a profit.
Ask questions about the home you’re considering. Also remember to research the neighborhood it is in and the area surrounding the location. Consider asking a variety of questions of your real estate agent. Is there going to be any nearby commercial construction going on in the projected future? What is replaced in the house and what will need to be updated? What are the pros and cons of the town the home is located in? Is the house located in a flood-zone? All of these are important questions to know before investing your money.
Be Careful With Mortgage Financing
While most of the companies that were giving out extravagant financing are gone, there are still some out there that can get you into trouble. Make sure you research your financing options and that they home you’re buying is truly one you can afford. Interest rates are always rising so a variable rate loan is not always the best option for you. If you are buying a home, whether to live in or flip, be sure that you can afford the mortgage payments should your rate increase.
Have Someone On Your Side
While you may have experience in this process, a down market can bring up hurdles and issues you never knew existed. It’s very important to have experts in the real estate and finance business on your side during the process. If something goes wrong and you’re doing this on your own, you may have trouble finding someone to assist you in making it right.
Your team should consist of a real estate agent that knows the market, a home inspector you can trust, a good handyman, and a great attorney to have available. Don’t forget your home insurance agent as they need to be in on the process as well.
Don’t Pay Too Much
Another common mistake real estate investors make is paying too much for a property. This all goes back to doing your research. If you’ve never bought a home before, be prepared for it to take some time. It takes diligence to find the home you want and need for your family. It can be quite frustrating.
So when you find the home you want, you naturally want the seller to accept your bid right away. Don’t get too excited and anxious to buy! You can make a big mistake of offering to pay more than the property is actually worth. Start by checking out the market around your dream home you’re interested in. Be sure that it is in line with the prices of home similar to yours. Always remember that there are other homes out there if this one does not workout. Do not jump into something before you’ve researched it as you may go on to regret it later.
Be Realistic About Expenses
Remember that just buying the home is not all that comes out of your pocket. There’s also the expenses of keeping the home running each month, fixing appliances or plumbing issues that come out, and maintaining the property. There’s also expenses such as a new roof or furnishing your home that you may not be considering.
All of these projects can add up quickly so it’s best you keep an idea in mind for how you can afford these plus your monthly mortgage and expenses. If you’re flipping the home, you also need to keep in mind the property values and what it’s going to take to get the home in good shape to sell it.
Keep these ideas in mind as you dive into the real estate investing market. It is a great way to invest your assets but you must be smart about it. Do your research ahead of time. Keep a good team of experts on your side throughout the process. Don’t forget the other expenses you’ll have and remember to always be smart about what you pay for the home.