Considering the volatility of several investment vehicles and seeing that real estate market has started to rebound, investing in real estate becomes a suddenly more appealing idea. No matter, how ideal the circumstances become, there is always a right and a wrong way to go about it.
In this post, we have tried to sum up the traps in which most of the new real estate investors often fall and the best ways to avoid these mistakes.
Lack of Planning
It is not wrong to state that lack of planning is the biggest mistake, new investors usually make. They invest in property without any prior planning as they get a good deal but later, they try to figure out what to do with it. However, it must work the other way around. First, you must have a plan and then find a property to fit into the plan. Never make an investment strategy after you find the home.
Director HomesPakistan, Asad Mirza states, “The problem is that people take real estate only as a transaction to park their investment instead of taking it as an investment strategy. They buy a property first and later decide what to with it due to which investors fail to achieve their target.”
You’ll Get Quick Rich
Whenever you meet self-appointed real estate agents, who themselves lack in knowledge – they usually make real estate investment sound so easy and a short way to get quick rich. Alas! This is wrong. Real estate investment is neither easy nor it is a short-term investment. Before investing your money in real estate, you must know that you will have to be smart, invest for long term and must be willing to do all the hard work besides understanding your risk tolerance.
Pro-investors usually have to move quickly on their deals and their experience, research and knowledge allow them too. And that is where a lot of newbie investors trip up. You must educate yourself before taking risk with your finance. You must have clear idea about the market condition and have detailed information to back your investment before plunging into any deal just based on the idea that the property prices will appreciate.
Misjudging Cash Flow
Unlike pro-investors, newbie investors do not come into real estate with any strategy. For instance, if your plan is to buy a property, hold it and rent it out – you need to have enough cash flow to cover maintenance expenses and vacancy period. However, it is seen that newbie investors put their all savings in closing one deal, with nothing left for maintenance of property.
This plan usually does not work, as you may not get suitable tenants for your property for sometime but you will have to pay for other expenses. In any such situation, you may get surprised, if you remain unable to make any money from your investment. Remember, if you have not devise a plan for investment, the asset can quickly turn into a liability. Do not test waters with both feet. Save money for your expenses.
If you are a newbie investor and planning to invest your savings into real estate, do your complete homework before taking your financial life in your hand.
About Author: Khadija Aslam is a marketing analyst at homespakistan.com and she writes on a variety of subjects including business, real estate, travel etc. Check her blog and find her on twitter and facebook.