How to Eliminate Risk in Real Estate Investment
Avoid 12 Common Mistakes Made by Novice Investors and Ensure High Rates of Return!
Real estate investment has provided many investors with positive cash flow, tax benefits and satisfaction of making an impact in others lives. Like any investment however, real estate has intricate nuances and market trends that when ignored can cause an investor tremendous heart ache.
Unbelievably many first time investors are willing to part with their hard earned cash without taking the time to study their investment. They rely on traditional trends and gut feelings. Before you risk your investment take the time to learn all you can about your market. By aligning yourself with the right professional you can avoid these 12 common mistakes and you ll ensure
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1. Failure to Determine Your Time Need - Cash flow, capital appreciation, tax benefits, loss of management, equity paydown and pride of ownership are just some of the things that need to be addressed before you make that investment. A service minded real estate professional can be a tremendous asset by taking the time to evaluate your needs and making sure you ve got all your bases covered.
2. Not Checking out the Seller or Sellers Agents Numbers - Claims of extremely high rates of return run rampant in real estate investment. Don t get caught up in the excitement - check everything: rents, payment history, taxes, expenses, deposits, future modifications… everything. Make sure you have
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3. Forgetting You Are Buying a Business - Owning investment property carries with it a great potential for creating wealth and… some potentially difficult decisions. Evictions, re-investment into the property and time management all need careful consideration. Remember this is not a hands off business.
4. Avoid Negative Cash Flow - Property that eats cash every month can drain your working capital. This can create stress, frustration and become quite painful. Predicting constant appreciation is extremely difficult if not impossible for the unseasoned investor. A strain on your cash flow may cause you to sell the investment before the benefits
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5. Failure to do a Thorough Inspection - Look under every rock! Hire a professional inspector. Ask the tenants about pest problems, structural damage or reoccurring problems. Don t overlook anything! A value driven real estate professional will help you find the right inspector and can help you avoid costly mistakes. When investing your hard earned money be sure and use sound business judgment!
6. Failing to Have Adequate Insurance - Investment property brings liability. Tenants, cars, parking lots, cleaning facilities, property liability - the list is quite extensive. Adequate insurance coverage is an absolute must! Be sure to consult with an insurance professional and protect your hard earned assets.
7. Inspect, Approve, and Confirm All Documents -
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8. Get a Bill of Sale For All Property Involved - Many types of personal property (appliances, furniture, fixtures, etc.) can be involved in an investment sale. Be very detailed -know who owns what!
9. Charge Fair Rents - Vacancies, turnovers and lease terminators are your biggest expense. Charge fair rents, treat your tenants
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10. Select Qualified, Good Tenants From the Start - Take the time to check references. Previous landlords, employers, financial references, credit and judgments are all vitally important. If there are any questions do a thorough investigation. Drive by their previous residence. A little work up front can save tremendous problems later.
11. Make Sure You Get Estoppel Letters - Get letters from tenants confirming the status of tenancy. Make sure their version of the rental or lease agreement corresponds with the sellers interpretation.
12.
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Neda Dabestani-Ryba is a licensed Realtor in Maryland. She is a member of the President’s Circle of Top Real Estate Professionals. She
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