Now that you’ve watched the umpteenth infomercial with the man wearing a nicely pressed white T-Shirt grinning from ear to ear and waving his rock-solid no-money-down rags-to-riches real estate course (but only if you call now), you think, “wow, this looks like a great deal, I better get it fast before the special offer expires.” Look around, there’s always a special offer. In any case, I don’t doubt that this guy is right, but regardless of which school of thought you agree with, there are certain things you should keep in mind when engaging in a real estate transaction.
Pitfall Number 1: Don’t Overpay!
The whole point of investing is to find undervalued properties. How do you figure out what’s undervalued and what’s overvalued? Having experience is the key. Real estate is basically one of the biggest ticket items in life’s shopping mall. If you’re just getting started, pick one market and stick with it. Eventually, you will know what is considered a good buy based on your experience and asking the right questions.
Pitfall Number 2: Know the Market
That’s right — you need to do some more research! It’s really just common sense, but how well you execute it will determine how successful you are. Where do you make money in real estate? Buying low and selling high are the most basic ways. From your first step, you have identified general trends in home values, and you are pretty adept at spotting undervalued properties. In the event that you acquire that home, you may decide to sell it off to someone else for a higher price. How do you go about doing that? You have several options. The value of most markets increases over time, so if you want a long term approach, that will work. In addition to raising the price of a property through upgrades, it will also increase its value. Consider what the market wants, rather than what you want. It is not you buying it; it is someone else you are trying to sell it to for a higher price than you paid.
Pitfall Mistake Number 3: Know Your Budget
It’s great to go through life on a whim, but real estate is serious business, which means careful financial planning and budgeting are essential to success. You don’t have to be a finance geek, but you do need to be disciplined and know your budget from the onset. Otherwise, you might find you’re making certain renovations and upgrades that weren’t expected to cost so much. Think ahead as to what is needed before actually going forth with investing in real estate.