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Avoid these Mistakes of the
Investing in real estate provides
many owners with positive cash flow, tax benefits and the satisfaction of
making an impact in others’ lives. Like
any investment, real estate has market trends that, if ignored, can cause an
investor tremendous headaches.
Many first-time investors part with their hard-earned
money without taking the time to study their investment. They rely on traditional trends and gut
feeling. Before you risk your money,
take the time to learn all you can about your market. By aligning yourself with the right
professional, you can avoid these twelve common mistakes and ensure an
excellent return on your money.
1.Failure to determine your time needs. Money,
capital appreciation, tax benefits, loss of management, equity pay down and
simple pride of ownership are a few of the things that must be addressed before
you make that first investment. A
service-minded real estate professional can be a tremendous asset by taking the
time to evaluate your needs and make sure you’ve got all your bases covered.
2.Not checking out the seller or seller’s agent’s numbers.
Claims of extremely high rates of return run rampant in real estate
investment. Don’t get caught up in a
wave of excitement regarding a property.
Check every detail - rents, payment history, taxes, expenses, deposits,
future modifications - everything regarding the finances of a potential
investment. Be certain you are working
with a good agent - it’s like an insurance policy against overlooking all the
seemingly insignificant but very important details.
3.Don’t get emotionally attached, it’s just business.
Owning investment property carries with it a great potential for
creating and holding wealth, but you may also be forced to make potentially
difficult decisions. Evictions,
re-investment into the property, and time management all need careful
consideration. Real estate investment is
not a “hand’s off” type of business - it will require your vigilance.
4.Avoid negative cash flow. Property that eats
cash every month can drain your working capital rapidly. This can create stress, frustration and
become painful over a period of time.
Expecting constant appreciation and positive cash flow may be unrealistic
for a novice investor. A strain on your
bank account may cause you to sell the investment before the benefits of
ownership are ever fully realized.
5.Failure to do a thorough inspection. Look
everywhere! Hire a professional
inspector. Ask the tenants about pest
problems, structural damage or recurring problems and don’t overlook
anything. A value-driven real estate
professional will help you find the right inspector and can help you avoid
6.Failing to have adequate insurance. Investment
properties bring liabilities such as tenants, cars, parking lots, cleaning
facilities, property liability - the list can be both extensive and
daunting. Adequate insurance coverage is
an absolute must. Be sure to consult
with an insurance professional to protect your assets.
7.Inspect, approve, and confirm all documents.
The list of documents that need to be proofed can be overwhelming to the
first-time investor. Building permits,
zoning laws, rental and lease applications, health licenses, inspection
reports, title policies - the list is long and you can’t risk oversights on any
of these. The right real estate
professional will work with you to make sure nothing gets overlooked.
8.Get a bill of sale for all personal property involved.
Many types of personal property (appliances, furniture, draperies,
fixtures, etc.) can be involved with an investment sale. Be very detailed and know who owns what.
9.Charge fair rents. Vacancies, turnovers and lease
terminators are your biggest expenses.
Charge fair rent, treat your tenants with respect and respond quickly to
their needs. It’s a lot less costly in
the long run to take care of the little problems while they are still little
rather than waiting. A vacant property
doesn’t make you money.
10.Select qualified, good tenants from
the start. You must 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 you all sorts of problems later on.
11.Make sure you get estoppel letters. Get letters from the tenants confirming the
status of tenancy. Make sure their
version of the rental agreement or lease corresponds with the seller’s
12.Don’t spend positive cash flow. Most successful investors have free and clear
properties. A historical
recommendation is that you should re-invest your positive cash flow back into
the property payment and speed up the amortization schedule.The goal of this is to decrease your debt
load and increase your equity, which in turn increases your net worth.A more strategic and safer approach,
available through a specialized real estate financial advisor, is to re-direct
positive cash flow to a safe side fund that participates in stock market gains
(while avoiding stock market losses).This way you build up a "private reserve" of sorts and
eventually over time you "pay off" the investment mortgage on paper, and
in the process you retain liquid access, use and control of your hard-earned
dollars, plus some other very important benefits.
Investment property can be
one of the most rewarding aspects of your financial portfolio. Be sure to be as knowledgeable as possible
before risking your money. Do your
homework! Consult with a professional
real estate agent and protect yourself from the hidden troubles that can plague first-time investors.
13.Choose your agent wisely. Working with
a full-time professional real estate agent is a must. Choose your agent by asking questions of him
or her. Find out how knowledgeable they
are about houses currently for sale in your price range and also of houses that
have recently sold. Does your agent work
with a good lender that has the reputation of excellent service and low rates
to assist you in obtaining financing?
Does your agent ask questions of you in order to have a full
understanding of what you are looking for and to help you to find the best
property for you?
Thank you for requesting a copy of
this “FREE REPORT”
For prompt, courteous, professional
service, call Jan Wilson:
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P.S. I appreciate
your business, your loyalty, trust and your referrals. It is my goal to provide
the very best counsel, advice and service possible for your real estate needs.
If I may ever be of assistance to you, a relative, friend or co-worker please
don’t hesitate to call me. I look forward to the opportunity to serve you.™