With housing inventories up and prices and mortgage rates down, the market couldn't be better for real estate investors. If you're new to real estate investing, it's easy to get in over your head with just a few false moves. Protect yourself and your investment by learning from the mistakes of others, says financial writer Pat Curry on Bankrate.com. Click the post title to read Curry's informative article.To achieve success as a real estate investor, avoid these 10 common mistakes made by investor newbies, advises Curry:
1. Planning as you go. One of the biggest mistakes investors make is not having a plan before they buy. Buying a house and then figuring out what to do with it is putting the cart before the horse.
2. Decide on an investment strategy, then find a house that fits your strategy.
3. Thinking you'll "get rick quick." Flipping houses for fun and profit appears infinitely easier on TV than it is in real life. You can make a reasonable return on your real estate investment but it takes time, hard work and financial smarts.
4. Playing Lone Ranger. Don't go it alone. The key to success is building the right team of professionals. At the very least, you need a real estate agent, appraiser, home inspector, closing lawyer and lender. You may also need a team of tradesmen to handle remodeling and building maintenance.
5. Paying too much. Mistakes in market analysis can lead investors to pay too much. Incorrectly judging the market is the main reason investors don't make money.
6. Skipping homework. Why do you think your mom sat over you at the kitchen table all those nights so long ago. Homework pays off. Read articles, books and blogs on real estate investing. Join the local chapter of the National Real Estate Investors Association. The more you know, the fewer the mistakes you'll make and the greater your rewards.
7. Ducking due diligence. Do your research before you sign on the dotted line. Make sure you factor in total costs and local market conditions or you could drain your bank account before realizing your goal.
8. Misjudging cash flow. If you plan to buy, hold and rent, don't underestimate the monthly cash flow needed to cover maintenance and management. Management fees typically run 7% to 10% of the monthly rent. You'll also have to pay the mortgage, taxes, insurance, association dues, advertising fees, etc. even during the months your investment property is not leased or rented.
9. Lowering the volume. You can't succeed as a real estate investor by handling one deal at a time. You need sufficient volume to weed out marginal deals and turn a profit.
Painting yourself into a corner. You must have more than one exit strategy. If Plan A isn't working, you already need to have in place Plan B and Plan C to fall back on.
10. Miscalculating estimates. Double the amount of time and money you think it will take to reach your goal and be prepared to spend it. All kinds of things can happen in the course of a real estate investment deal, many of them unexpected, especially if you're new to the game. If you don't wind up spending everything you've budgeted, you'll be ahead of the game. But you don't want to be caught with too little time or money to take the deal to fruition.
I can't stress enough read, read, read and plan, plan, plan.
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