Real estate investing is surely a great business opportunity for making money. Nevertheless, not every real estate investor becomes successful. Of course, there is a reason behind it. Sure enough luck plays some role in having a prosperous real estate investing career; however, there is much more than just luck to it. What matters the most is the time and effort the real estate investor puts into his/her business. One of the key elements for making money out of real estate is choosing the best of the many real estate investment strategies for your particular case. While realtors usually search for the best real estate investment strategies, we are taking a different approach by showing you the worst ones. In this way every real estate investor would be able to review the issue from a different perspective. Here are four of the worst real estate investment strategies:
Related: What Are the Best Real Investment Strategies Every Investor Should Know?
#1 Not Creating a Proper Real Estate Investing Business Plan
When discussing the worst real estate investment strategies, we should surely mention the lack of a proper business plan. If you are willing to be making money as a real estate investor, it is a must that you create a good investment plan. There are some important variables that you need to carefully consider:
What are your goals?
How can you go forward and develop your real estate investing business if you don’t have goals to reach? It is impossible! This is why every real estate investor needs to take the time to create a real estate investing plan. One of the most important things in a real estate business plan are the goals you want to reach. It is also essential to think of possible ways for reaching the set goals. Only in this way will you avoid using one of the worst real estate investment strategies.
How do you want your real estate investment portfolio to look like?
This is an important question for every real estate investor. You need to consider what types of investments you would like to include in your real estate investment portfolio. Many realtors, for instance, focus simply on residential real estate investing. Others believe that by being diversified real estate investors, they have a higher chance of success. Regardless, in order to avoid ending up with the worst real estate investments, you need to carefully think about this. Do not forget to consider your available assets as well as the ways to avoid the worst real estate investment strategies.
What is your budget and how would you manage your finances?
Another extremely important characteristic of a real estate business plan is its financial part. It is essential that you know your budget and you invest your assets with care. Furthermore, keeping a constant track of your budget might help you a lot. By monitoring your business, you can see if you got some of the best or worst real estate investments and act accordingly.
#2 Not Conducting Real Estate Market Analysis
Not conducting real estate market analysis is one of the worst real estate investment strategies there are. This is due to the fact that by researching and using various real estate tools and metrics, you can get a better understanding of your potential investments. In this way you can invest in the best properties and avoid the worst real estate investments. By conducting real estate market analysis, you look at the location, the optimal rental strategy, etc.
As a landlord in residential real estate investing properties, you should know that the location of your place is of key importance. There are real estate market analysis tools such as Mashvisor’s investment property calculator, which can provide you with the necessary information. Mashvisor’s investment property calculator would provide you with detailed information about the chosen location. This includes advanced neighborhood analysis as well as the optimal rental strategy for the property and the place. This brings us to the next point.
Related: Why Is Real Estate Market Analysis So Important?
#3 Misjudging Airbnb Rentals
Even though Airbnb rentals supposedly bring higher rental income per night, they are sometimes considered to be one of the worst real estate investment strategies. Don’t get me wrong, there is nothing wrong with Airbnb rentals. The problem appears when the real estate investor has not properly considered the optimal rental strategy. Sure enough, every landlord wants to make as much money as possible. However, short-term Airbnb rentals are not always the right investment. The reason behind this is the fact that there are many variables to be considered in residential real estate investing rentals. For instance, what is the demand for rentals in the real estate market? What type of tenants are attracted to the area? Are you investing in a tourist/vacation spot or simply a residential area? Every landlord should carefully think about these aspects and choose the optimal rental strategy for his/her real estate investments. As previously mentioned, tools like Mashvisor’s investment property calculator might help you in this decision.
Related: What Can I Rent My House For?- Traditional and Airbnb Rentals
#4 Having Anything to Do With Negative Cash Flow Properties
Making money from real estate simply means investing in positive cash flow properties. Many real estate investors neglect this criterion or just assume they can turn it around. This, of course, leads to one of the worst real estate investment strategies. The truth is that negative cash flow properties not only are not profitable, but they can actually harm your investment business. Be sure to check the potential cash flow of your property before investing in it.
There are many bad and many good real estate investment strategies. In order to develop your career and grow your real estate investing business, you need to be careful in your decisions. Take the time, invest the required effort, and make the best investment choices possible!
Meanwhile, to learn about the best real estate investment strategies as well, keep reading on Mashvisor.