Most people ask questions to help them move further in their goals of investing in real estate. Such questions are completely understandable, because it is a healthy form of skepticism. For this reason, we have compiled these five very expensive pitfalls when investing in real estate. We also added ways through which you can avoid these pitfalls.
Buying the wrong property
The first pitfall to avoid while investing in real estate is buying the wrong property. Buying the wrong property is a serious and ‘expensive’ pitfall. Sometimes, you may be overloaded with all kinds of investment proposals. There are investment proposals of various kinds: ranging from holiday homes at home and abroad, to investing in hotel rooms or from brokers or companies that specialize in investment properties.
There is a very good chance that there is nothing interesting to be found there and when you move on to invest in such properties, you may get a poor return, with all its consequences. You should understand and know which specific properties you should invest in or not. It is not the type of property that the average person or most of you think about.
They may not be luxury assisted living apartments, service apartment buildings or super luxury apartments in the heart of Lagos, which are thought to be able to receive a lot of rent. However, you can never go wrong when you purchase property from us.
Investing in the wrong region
The second trap you must avoid when investing in real estate is investing in the wrong region. Investing in the wrong region is a major mistake or trap for many novice investors. For example, investing in properties for rental income in sparsely populated areas is something a Real Estate investor should avoid.
You must first do your homework before investing in real estate. This means that you first check the important requirements of a region and if those requirements meet, you can move forward to invest in such a region. Choosing the right region is also one of the most important steps when investing in real estate.
Overpaying for a property
Another trap you can fall into when investing in real estate is overpaying. Even if you have found the right property, due to a lack of insights and negotiation techniques, most pay an average of 10 to 30% extra for an investment property. You may be too excited and insecure and therefore, may not command a competitive price.
In addition, you may not know which type of seller can get the biggest discount. Every now and then, people pay too much for a building. This has devastating consequences, not only for the return, but also for obtaining financing, as banks work with an execution value. If you have paid too much, you will have to use more own resources. Banks always request an estimate or valuation report. When they determine that people have paid too much for the home, they don’t use emotional arguments as to why they paid too much. You should also know how you can purchase properties very sharply and thus achieve the first profit.
No Knowledge of Funding
One of the traps you should avoid in investing in real estate is not having knowledge on how to go about your rental properties funding. Mistakes are rampant if you don’t know how to apply for financing for a rented property, whether you want to acquire a commercial property or personal property.
One of the mistakes includes knocking on the door of the wrong bank, which is not at all interested in financing for rented real estate. Even if they do, they set so many conditions that they become discouraged. The second problem which one can encounter in financing real estate is that one has to deal with unmotivated and false bank manager, bank teller or mortgage lender.
Your bank relationship manager plays a crucial role in the success of financing. If it does not ‘click’ there, it will certainly not work with the credit analyst. If you are lucky enough to have the right bank and the right relationship manager, you will achieve great funding success, because then you will be confronted with the right credit conditions and the right interest.
If you are into real estate, you should notice that there is a lot involved. It is not just getting a ‘sandwich’. Good preparation is crucial before going to the bank. You need to spend a lot of time to learn how to go to a financial institution well prepared.
Attracting the wrong tenant
Attracting the wrong tenant is also a huge pitfall. This is one trap that you can easily fall into. As long as you have overcome the four previous pitfalls, you should know that the next pitfall is already around the corner. That is why you must ensure that in the coming years, you will attract the right tenant who pays the rent correctly every month or yearly.
In real estate, it is called the ‘management’ of real estate. In recent years, a system has been developed for this, so that the right tenants can be screened and any rental problems can be dealt with. You may have been contacted by property owners to manage the property. These owners are enthusiastic and have the property rented out by you, the real estate agent, trusting that you have found the right candidate tenant and a few months later, the nightmare begins.
For this reason, you should be very careful to avoid the wrong tenants from coming your way. Tenants should be well screened, and a background check, if possible, should be carried out of them, this system of in-depth research on the tenant can help you make the right choice while choosing tenant.
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