The real estate market once again proved its resilience during an economic downturn. Even during the COVID-19 crisis, the housing market stood firm and attracted even more consumers to kick start their real investing journey. People are not simply buying better houses. More people are now investing in real estate. They realized just how important residential real estate is and how businesses managed to stand firm despite the crisis.
If you are among the number of consumers planning to take on real estate investing, know this. It is very easy to make mistakes that can quickly turn into financial headaches. If you want to get the most out of your investment, learn from these pandemic real estate investing mistakes:
Not Knowing When to Hire the Right Professionals
Different experts are offering their services to help your tasks a lot more manageable. We are not simply talking about a property lawyer who will negotiate for you and will ensure all legal documents are fair and legit. Choosing to do everything on your own will only stress you out, can cause you to miss important details, and even result in an unfavorable deal you are unable to spot on time.
If you want easier and smoother real estate transactions, you can hire local real estate agents. Their knowledge, experience, and connections can make a big difference in getting the best properties and negotiating better deals. You can focus on the things you are good at and learn about other things you ought to know while they handle property hunting, negotiating, and deal closing.
A competent home inspector, on the other hand, can alert you in case the property has flaws that can bring down the property value. A land surveyor, on the other hand, can ensure that the property and contract you will be signing are consistent with the location and measurement of the property. All these professionals and more can help ensure you are making a sensible investment out of your hard-earned money.
Property Hunting Before Getting a Preapproval
It is true that real estate investors can simply apply for a loan and put down a down payment, so they can start their real estate journey. But then, it is important to remember that not everyone can qualify for all real estate financing options. One of the biggest mistakes you can make is to find a property first before you get preapproved for a mortgage.
For instance, you plan on buying a multifamily property. You plan on renting out the other units while living in one unit. But just because you can afford the down payment already meant you automatically qualify for a loan.
It is important that you explore all of your financing options first before you look for investment properties. This will make it easier for you to determine how much of a property you qualify for and can comfortably afford. It will also save you the heartache that comes with falling in love with a property only to learn you can’t afford it in the first place.
Underestimating Future Expenses
Like homebuyers, some real estate investors make the mistake of undercalculating the possible expenses. Aside from the property purchase price, there are other costs that can quickly add up. This will depend on the type of property you are buying and the financing option you chose.
For instance, you bought a duplex home and only paid your lender less than 20% down payment. This usually means you are expected to pay property mortgage insurance on top of your monthly mortgages. Don’t forget that you have other expenses to pay, including property taxes, homeowners association fees, home maintenance, and home insurance.
Failure to consider these costs can quickly increase your expenses. Before you make an investment, make sure you already anticipate all possible expenses. Pay attention to all probable expenses and you can reduce future financial headaches.
Thinking There are Only a Few Ways to Invest in Real Estate
Another common mistake investors make is thinking real estate investing is all about buying a property they can rent out to tenants or investing in a fixer-upper property they can sell afterward. Know that there are many other ways to make money out of real estate.
For one, you can buy raw land, wait for its value to increase, rent it out to tenants, or subdivide the land and sell it for a profit. There’s mineral rights where you pay the property owner to gain rights for a limited amount of time to explore and use oil and natural gas found on their property. You can even invest in online real estate crowdfunding platforms to diversify your portfolio.
Like any other investment, real estate investing has its own perks and drawbacks. This is why one should take the time to learn how real estate investment works before making an investment. Keeping these mistakes in mind will make it easier to avoid the pitfalls that come with investing in real estate.