First Time Investing In Residential Real Estate? Avoid These 4 Mistakes!
The world of residential real estate investment can be quite lucrative, and there's lots of money to be made here. In the United States alone, the residential real estate market was valued at a whopping $27 trillion in 2019 alone. Looking to get yourself a piece of the pie? There are some rookie mistakes you'll want to avoid as you get started as an investor.
Overlooking Ongoing Maintenance Costs
It's not surprising that one of the first steps you should take before buying an investment property is to crunch the numbers. When budgeting for your first investment, however, don't make the mistake of overlooking ongoing maintenance costs for any given property. These expenses can really add up, especially when you factor in costs like plumbing and HVAC inspections, appliance repairs, and landscaping. And of course, if you're buying a home in a neighborhood with an HOA, you can expect to dues monthly, quarterly, or annually.
Foregoing a Home Inspection to Save Time
One of the biggest mistakes you can make as a beginning real estate investor is skipping a home inspection or buying a home "as-is." Foregoing a home inspection may save you a little time and allow you to close on the property faster, but you could be overlooking major problems that will cost you thousands of dollars down the road. Keep in mind, too, that many real estate investment loans require an inspection and appraisal as a stipulation of your financing.
DIYing Everything to Save Money
While it may seem like a wise idea to handle repairs, landscaping, and other general property maintenance yourself to save money--this could actually end up costing you down the road. You might be saving yourself money, but you'll also be costing yourself precious time that could otherwise be spent marketing your property, screening potential tenants, and improving your profits. This is where hiring some contractors or even a property management company can be a smart investment.
Overestimating Fair Rental Rates
Asking for more in rent than your property is worth is a sure way to end up with gaps in occupancy--and of course, these gaps can cost you dearly. Make sure you understand the fair market rental value of a property before you decide to invest in it. From there, you'll be able to crunch the numbers and better determine whether the investment is worth it based on the amount of rent you can be expected to bring in.