Blog | Real Estate

Can You Avoid Mistakes in Real Estate Investing?

Strategies to help you get over the roadblocks

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For anyone who is considering real estate investing as a career, they need to understand that while it can be a profitable business venture, it is hardly a get-rich-quick scheme. There are many people I encounter who lack the grit it takes to learn about real estate investing, they simply want to make large amounts of money quickly with little effort. Life doesn’t work that way and real estate investing surely doesn’t work that way.

The last person anyone wants to call is a bankruptcy lawyer. So, whether you’re just starting out in the real estate business or are currently a real estate mogul, protecting yourself from investing mistakes is crucial.

A failure to plan

Any successful investor knows that planning is imperative if you want to achieve results. At Rich Dad, we always talk about knowing your financial strategy. It’s the only way to ensure you have a profitable venture.

So, when we look at investing in real estate, the first thing we have to look at is whether there is enough equity and/or liquid assets to hold the property. Poor budget planning, a market downturn, unforeseen repairs, or delays can seriously impact the bottom line of an investment. That is why I am a strong advocate for creating strong teams. Make sure you hire people who can help you assess these risks.

This will lead you to knowing as much as possible about the property you wish to invest in. Your team can help you research its history, the overall market situation, and the surrounding area. This will help you determine if the property fits into your overall investment plan.

When determining if a property is right for you, think about this:

Is the current state of the property acceptable? Are there major structural issues? What will need to be upgraded or replaced to make the property livable? Will this be enough to return a profit? Is the neighborhood promising? How is the property zoned?

These are all good starting questions to help you understand the property a little better. And once you have a good understanding of the property, you will be able to make a sound judgement on whether or not it seems like a sensible long-term investment.

Avoid this common mistake

One of the biggest mistakes new investors make is being impulsive and not putting in the time or effort to ask the right questions. Investment decisions should be based on reliable knowledge and sound business calculations, rather than an emotional reaction or a gut-feeling.

If you want your future to be successful, you have to plan. When you don’t plan properly, you find yourself stuck with no profitable exit strategy.

The best approach is to have multiple exit strategies ready for each outcome. Optimistically, you’ll still make a profit, but at the very least you’ll be able to cut future losses.

As you can see, there are many hurdles that can stop you from getting started in real estate investing. That’s because in reality, it isn’t easy. Trust me, if it were easy everyone would be doing it. But like I said earlier, most mistakes can be avoided with careful planning, diligent research, and asking the right questions. Build yourself a solid team and you will have the potential for profitable and sustainable investments.

Original publish date: October 14, 2019

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