How to Avoid Problems Investing In Real Estate

By: Blaine

According to the American Real Estate Investing Statistics and Trends, there are about 28.1 million real estate investors. As much as 37% of them have a high school degree or less and 55% are college graduates while more than 30% of all active investors make more than $75,000 a year. Another interesting fact is that these investors spend about 9.2 billion dollars renovating real estates. Here is how the list of those investments according to the amount of money spent looks like:

  • 16% invest $30,000 or more;
  • 20% invest $20,000-$30,000;
  • 12% invest $10,000-$20,000;
  • 18% invest $5,000-$10,000;
  • 40% invest $5,000 or less.

Even though it can turn out to be a very lucrative business, real estate investment has many possible problems lurking behind the corner. It may seem easy for those who are not into it, but the truth is that a lot of work should be invested and important decisions made in order for it to be successful. Otherwise, everyone would do such job since there is a lot of money in it.

In the following text, we will provide you with certain guidelines which should help you to face the greatest problems which you will encounter if you decide to enter this field of business.

1. Make the Adequate Research

The first thing you should do is carry out a thorough research of the exact type of real estate market you plan to deal with. For example, when buying a car, we ask many questions trying to determine whether they are really worth the money we should pay for them. The task of investing in a real estate property requires much more effort on our side regarding enquiring – we should get to know its surrounding area and to see whether it is adequate for families or students by considering the following:

  • Whether the area is problematic regarding floods, radon, etc.;
  • Whether there are issues regarding permit;
  • Whether the furniture in the house is old and should be replaced;
  • How close it is to commercial sites;
  • Possible long-term construction sites in that area;
  • The price the homeowner paid for house and time when he bought it;
  • The reason the homeowner decided to sell it.

The most common mistake newbies make is not doing their due diligence regarding the deal, market conditions and costs. Therefore, they end up spending their personal savings on extensive repairs, or they have problems selling the house as real estate agent from Houston Laolu Davies-Yemitan says. According to him, many new real estate agents fail to gather relevant information and that is the reason they fail or face serious problems.

2. Avoid Excessively Individual Approach

Real estate agents are often too confident about their knowledge regarding real estate transactions. Even though many of them are successful at first, they are almost sure to run into trouble in a down market where they have to seek help in order to fix unfavorable real estate deals.

That is why it is important to work with a team of professionals right from the start. This team should comprise of a decent real estate agent, a capable home inspector, a competent closing attorney, and an insurance representative. With their help, you should be safe from any flaws that could be found in the home or its surroundings, and possible defects that could be found in the title or easements.
You should also have a team available in the case of maintenance or renovating, which should consist of an electrician, a painter, a flooring installer, a roofer, a lawn maintenance service, a heating and air conditioning service, and a cleaning service. You should also have an all-around handyman since you should focus on your part of business as an investor instead of installing ceiling fans and fixing faucets.

This investigation was provided by authors of  the FSND website to determine the trends and directions of real estate industry development.

3.Get Rid of Excessive Payments and Underestimated Expenses

Another serious common mistake that buyers tend to make is paying excessively for what they buy. After the frustrating and time-consuming process of finding the right home, they are usually anxious to get it. This often results in overpaying leaving the buyer in a big debt which can take years to compensate for.

In order to determine whether the price is too high, it is important to compare it to the prices of similar homes in that area. You can either consult a real estate broker or look for information in the local newspaper. Comparing these prices and considering the unique features the house you want to buy has, it should not be too hard to evaluate and determine a proper bid consistent with such information.

First-time investors are also likely to forget or underestimate expenses that should be covered when looking for a house to buy. There is a lot of expenses that should be kept in mind, such as furnishing the house, mowing the lawn, tending the garden, painting the shed, appliances maintenance, etc. But these are even small compared to making structural changes to the house or installing a new roof. Insurance and property taxes are not to be forgotten either. Therefore, it is very important to create an estimate list of monthly expenses regarding maintaining the home prior to placing a bid.

4.Do not Expect Fast Enrichment

According to Eric Tyson, one of the authors of “Real Estate Investing for Dummies”, getting rich in real estate business is not at all easy as some tend to portray it. It can prove to be an excellent long-term investment, but there is an easier way to achieve it – through putting money in a mutual fund. Many people who get rich like to talk only about the good sides of their jobs. They don’t mention all the hard work, the need to be willing to work, to be smart, and to understand one’s risk tolerance.

5. Do Your Homework

It is very important to first invest time into educating yourself before venturing into this business, and this is what many newbies fail to do. They are not even aware of how risky their investments may turn out to be. You have to be up-to-date and read articles. It would also be smart to consult a local person who owns a lot of properties in your area – you could offer to pay him so that you can see whether this career would be a smart choice for you.

Always remember to make an in-depth research before seriously considering to place a bid. Take into account all the possible expenses regarding maintenance, renovating, insurance and property taxes. And do not be hasty about making big decisions! There are always other opportunities available, and the chances are in your favor that there are more homes that will meet your needs. So be patient. By following this advice you are very likely to avoid most of the struggle that troubles the inexperienced real estate investors. To see all the offers the real estate is here http://www.broughrealty.idxbroker.com/idx/search/basic .