The great part of making mistakes in real estate investing is learning from them and avoiding the same real estate mistakes in the future. The path from the beginner real estate investor to the most successful real estate investor will not be easy. The only way to become an experienced real estate investor is to make real estate mistakes and learn from them. Curious to find out what are the most common errors made by real estate investors? Then keep on reading to find out!
#1 The Biggest Investor Mistakes: Lack of Real Estate Education
Lacking the understanding of the real estate investing business and still rushing into the real estate world is the number one problem among new real estate investors. Real estate investing is breathtaking and exciting as it can make you rich very fast. Therefore, beginner real estate investors get impatient. Consequently, they jump right in by buying an investment property. Do not do this, as it will affect your real estate career in a negative way.
It is important to take the time and put your effort into learning about the positive cash flow properties from the most successful real estate investors. Communicating with experienced real estate investors, following real estate education courses is the only way of becoming one of the most successful real estate investors.
So, how to become a successful real estate investor? Well, ignoring the most important aspects of the real estate education is a type of mistake a new real estate investor should avoid. Real estate investing is full of formulas that help the real estate investor to determine where his/her business stands. Understanding various real estate metrics will help you to determine the return on investment and financing possibilities.
One of the most common real estate mistakes beginner real estate investors make, is forgetting to plan an exit strategy. Real estate investing is about making money and building wealth, so if you do not know what to do with a property after buying it, you may lose money. How, you may ask? When you have a clear plan and you know what to do with the property, you are able to determine the offer you should make. Moreover, a new real estate investor will have enough time to decide if he/she will need financial support as well as where to get it. To learn more about real estate education, make sure to read “How Much and What Real Estate Education Do You Need to Become an Investor?”
#2 The Biggest Investor Mistakes: Ignoring Real Estate Investing Tools
Every experienced real estate investor, as well as the most successful real estate investors, know that calculating real estate metrics takes a lot of time and effort. How to succeed in real estate, then? You have all the chances of becoming a successful real estate investor if you use a rental property calculator. Let’s explore one of the biggest downsides of not using a rental property calculator in real estate investing.
It will take a lot of time for a beginner real estate investor to find the best investment. Even though you can never be sure that the chosen property will generate positive cash flow, analysis proves to help. Calculating real estate metrics and conducting real estate market analysis is a time-consuming process. Moreover, selecting the wrong market may leave you buying an investment property that will generate negative cash flow.
So, what is the benefit of using a rental property calculator? Aside from the fact that it computes cap rate, cash on cash return, and return on investment in seconds, it can teach the beginner real estate investors many things about real estate investing. Well, Mashvisor’s rental property calculator will show real estate investors where to invest and how to find investment property. Additionally, the tool will suggest the optimal strategy and will provide results, based on your financing strategy. Moreover, with Mashvisor’s rental property calculator, a new real estate investor will be able to grow his/her real estate investment portfolio. This calculator will provide you with the basic information a real estate investor needs to know after buying a property- “learning by doing.” Interested to learn more about must-have investment tools? Make sure to read “6 Must-Have Real Estate Investment Tools.”
#3 The Biggest Investor Mistakes: Owning Negative Cash Flow Property
Many real estate investors have faced negative cash flow properties. However, what could be the reason for categorizing your property as a negative cash flow property?
Mistake Number One: Demand and Supply
One of the reasons real estate investors are losing money is due to unoccupied properties. If the purchased property is occupied less than a six months in a year, most likely you will end up owning a negative cash flow property.
Mistake Number Two: Wrongly Chosen Rent
Another real estate investing mistake is the rent a landlord charges. If you charge a lot, your property will have high vacancy rates as tenants do not want to overpay. Another scenario is that you charge too little. Consequently, you will have high demand, but you will not be able to cover all the expenses with the rental income you get.
Mistake Number Three: Excessive Upkeep
Another reason, causing your property to be categorized as a negative cash flow property is the excessive upkeep. Spending too much on renovations, furnishing, etc. will result in a bigger outflow of money than inflow. Yet, with such actions, you will be able to increase the value of your property by forced appreciation. However, when you finish your money you may end up in financial trouble. The secret to upkeep is to find the right balance. Interested to learn more about forced appreciation? Make sure to read “The Best Tips for Forced Appreciation in Real Estate Investing.”
#4 The Biggest Investor Mistakes: A Lot of Theory and No Practice
Another real estate investing mistake is being stuck in the so-called “learning mode.” Beginner real estate investors plan on becoming successful in the real estate world. Due to this, they learn from A to Z about: buying an investment property, return on investment, negative as well as positive cash flow properties, etc. The downside of being stuck in the learning mode is that investors cannot get the experience. Moreover, they will not be categorized as investors as they do not actually invest. Our advice for this type of beginner real estate investors is to choose one strategy that fits them. The next step would be to learn about it and invest. After all, the best way to become an experienced real estate investor is through learning by doing.
To learn more about building a real estate investment portfolio, continue reading our blog.