Investing in real estate can be tough, this is a fact. It often takes time and effort to be successful in this line of work, but it can be and has been done.
William Shakespeare famously remarked that there is a tide in the conduct of men that leads to fortune when taken and if omitted leads to misery. With this in mind, I have compiled a list of some of the pitfalls of real estate investing and how to avoid them so that you may have a better experience.
Table of Contents
1. Create a master analysis spreadsheet
Data exists for a reason- to help you make rather than lose money. People who do not understand this concept can usually be found lagging behind in the real estate investing class. You should always create an excel spreadsheet when investing as this will help you analyze all available deals. The factors generated by your spreadsheet such as the ROI on various deals will help you make the optimal decision when you invest.
2. Emotion vs Logic
Emotional stability is something you want to maintain during the course of your real estate investing career. Whether or not you invest in a particular property should be based on what the numbers tell you and whether or not the investment makes logical sense. It is easy to get emotional when you are purchasing a rental property, especially considering the fact that it’s a place where families will be raised and memories made. In real estate investing, however, it is advisable to keep all emotions at bay. Instead, you should endeavor to treat it as a business. Focus more on the returns, for instance, cash on cash returns as a way of determining how logical a particular investment is.
3. Do sufficient Research
Abraham Lincoln once stated that if he was given six hours to cut down a tree, it would be most efficient to use the first four sharpening the ax. Lincoln’s emphasis on the importance of preparation in even the most trivial of undertakings still rings true and there is no better preparation when investing in real estate than doing sufficient research. Many people have lost money in real estate simply because they did not take the time to understand the property they bought and whether it was worth the investment. Ensure that you understand the costs, risks, and rewards involved before making a commitment.
4. Don’t spend too much analyzing a property that you miss more lucrative opportunities
When you are conducting your research, it is important to draw the limits on how much time you should spend analyzing a particular property. Keep in mind that every minute spent analyzing a property is a minute you could have used to scout for other opportunities. That is why it is important to keep a balance between these two. Sometimes, investors lose money by over-analyzing one property at the expense of pursuing other opportunities. Avoid falling prey to this habit.
5. Get a manager who gets the job done
Accepting our limitations is one of the cornerstones of wisdom. Getting help from others is not necessarily a sign of weakness, sometimes it can mean the difference between failure and success. Unless you are a computer and can do very many tasks at a time, you might want to find someone efficient to help you manage your real estate.Dealing with tenants can be tough especially when it comes to eviction situations. By gaining the cooperation of a good manager, you have more time to focus on pursuing other investment opportunities and this helps you achieve better results.
This simple tips are practical and can be carried out by any person of reasonable intelligence and emotional stability. Practice them and as surely as the sun reaches it’s zenith, so shall you achieve your real estate aspirations.