Blunders That Can Ruin Your First Real Estate Investment

While there’s no denying that many investors have made a fortune through real estate, this shouldn’t be taken to mean that every real estate investor is equally successful. In fact, jumping into the real estate game unprepared is liable to deplete your finances and leave you reeling from buyer’s remorse. That being the case, it’s in every first-time investor’s best interest to get educated before proceeding to make any commitments. To this end, make a point of avoiding the following blunders.  

Selecting a Funding Method That Doesn’t Work for You 

While the adage “You have to spend money to make money” often holds true in the case of real estate investments, it’s easy to see why so many first-timers are hesitant to purchase their first investment properties. After all, even low-level properties tend to represent sizable investments, and if your real estate experience is limited or nonexistent, any apprehension you may feel is perfectly understandable. 

As the name indicates, this method of funding involves multiple investors pooling their resources and investing in properties located by people who specialize in identifying safe real estate investments. However, it’s important to remember that while the crowdfunding route carries less risk, so too does it carry fewer individual rewards. This means that even if a crowdfunded investment proves successful, the amount of money you’ll make will be less than you’d get if you were the sole investor. So, before going all-in on this method, just remember that there are a number of real estate crowdfunding factors to consider.  

Overpaying for Investment Properties 

Considering how much the average investment property costs, it stands to reason that you’d want to avoid overpaying for your first one. So, regardless of how much a certain property appeals to your personal tastes, take care to cross your t’s and dot your i’s before committing to purchase. 

Upon finding a property that strikes your interest, take some time to research what similar properties in the area are being sold for. Should you discover that the asking prices attached to those properties are considerably lower than what the seller is requesting, inquire as to why they feel that theirs is worth so much more. If the seller is unable to justify their exorbitant asking price, request a considerable reduction or simply walk away from the deal. 

You can also avoid overpaying for your first investment property by thoroughly researching the respective locations of any properties you’re thinking about purchasing. In order to determine how much demand exists within a given area, you’ll need to carefully consider such factors as home prices, rental rates, population size, growth projections and local economy.     

Failing to Have Properties Inspected 

Purchasing an investment property that hasn’t been subjected to a pre-purchase inspection is a decision you will likely come to regret. Without a thorough inspection from a certified professional, you’re liable to inadvertently purchase a property that’s home to a plethora of outstanding issues. Needless to say, becoming aware of certain issues long after a sale has gone through can be an intensely frustrating experience. 

So, no matter how confident you are in the condition of a property, you should always insist on a pre-purchase inspection. Additionally, if a seller adamantly pushes back against this, this should raise questions about what kinds of issues they’re trying to conceal. A professional inspection will help ensure that you know exactly what you’re putting your money towards and effectively prevent you from making an uninformed purchasing decision. Furthermore, depending on what issues an inspector uncovers, you may find yourself with enhanced bargaining power. Should the results reveal the presence of problems of which you were hitherto unaware, you’ll be perfectly justified in asking for a reduction in price. 

Your first investment property can prove to be a highly profitable purchase. However, if you fail to do your homework, it can just as easily be one of the most consequential buying decisions you ever make. Since regret is an emotion no one wishes to experience in the wake of a large investment, fledgling investors would do well to get educated in advance of their first property purchase and avoid falling victim to the blunders outlined above.