Property investment isn't a piece of cake – during my career in the sector, I've seen many people committing the same mistakes over and over again, without using their common sense and developing a sound investment practice. Here are 10 key do's and don'ts that will guide you thought the meanders of real estate investment.
1. Do study the field
Mistakes are made by those who rush and don't take enough time to study their field of interest. If you want to make it in this business, prepare to take aside lots of personal time to properly research the sector, check neighborhoods that interest you and delve into research analyses that might point you in the right investing direction. Doing your homework will protect you against making a mistake that can cost you a lot. Better safe than sorry is a golden rule of investment.
2. Don't buy on the basis of future value
Otherwise called “pro forma”, this is a practice based on buying property on the basis of what it “could” be worth, not what it's really worth at the moment. This is actually something that many real estate agents do – neglecting current problems or issues, they ten dot focus on the future possible value of a property.
This is something you should definitely be aware of so you don't fall into their trap – never consider a property without knowing its current value. Push the future value to the back of your mind – after, all you don't control the future, do you?
3. Do order your finances
Before you consider buying more houses, it's crucial to get your own property in order. Assess your situation critically – you need to know your existing income, regular expenses and loans. Investing in property will complicate all these aspects, so you should be sure you're taking the right steps.
If your household economy escapes you, take a month or two to observe and note down everything you spend money on – you might discover sources of potential savings that would allow you to invest with more cash. Factor everything into your calculations – also big spendings that you'll be making in the near future.
4. Don't blindly follow a guru
There are many real estate gurus out there ready to convince you that by following a number of steps you'll end up becoming a millionaire. Well, making millions is within your reach, but only if you decide to use your brain, not a step-by-step system. Investing is ultimately about adapting to change and no system proposed by a guru can be flexible enough to contain all possible variables that come up in such a dynamic market.
5. Do establish your real estate goals
Acting without a plan that brings your closer to achieving a central goal makes no sense. Before you make any move, find a quiet place and reflect on what exactly you want to achieve in real estate market. Having a clear idea about your budget, the kinds of risks you're willing to take and the length of time you'll allow your money to be tied up is crucial to developing the right investment practice.
6. Don't gamble instead of investing
It's one thing to invest, and another thing to gamble. If you buy a property hoping that one day it will bring you a great profit, you're not investing, but speculating or gambling. Now, this is not to say that gambling practices are wrong – it's just essential to differentiate between the two.
Building spec homes or investing in raw land will often have an element of speculation to it and that's ok – but only as long as you know what you're doing. Investing and speculation involve different skills and financial resources. Just make sure what you want first and then go for it.
7. Do visit the property personally
Being a diligent investor is not only about the extensive research you do at home, but also about actually driving the neighborhoods themselves. Yes, you can consult with a real estate agent and he'll tell you a lot interesting things about property locations, but without developing an instinct you'll never be able to rely on yourself. Getting it right will only be possible if you're directly involved in the process.
8. Don't immediately agree to a miraculous deal
Sometimes you'll stumble upon a property that will look just like a perfect investment and your fingers will be twitching to sign the contract before someone snatches this occasion from under your nose.
Well, it's important to react quickly when you spot an occasion, but with deals that are too good to be true, you should take your time to figure out what is it that you're not seeing about this property. Consider this – how come such an amazing deal is still available? What made others turn away from it? Your best deals are more often those you find reliable and sort of boring, not exciting.
9. Do meticulously keep your records
Many investors don't take record keeping seriously, but when it comes to assessing the general situation of their investments, they might not be able to give an accurate answer. By taking good care of your records, you'll be able to analyze your current situation and make truly informed decisions regarding future investments. If you decide to take a loan, the process will be much simpler with all records in order.
10. Don't be paralyzed by analysis
Just because you shouldn't make rash decisions doesn’t mean you have over-analyze every single one you're about to make. Some investors find themselves suffering from an analysis paralysis – with too much information on their hands, they're unable to choose and take action. This is just a phase you can get through, but remember that once you know what you want and find opportunities that perfectly match your requirements, don't be afraid and plunge right in.
Investing in real estate, it's relatively easy to make a very expensive mistake. That's why you should make sure that you follow the best examples and make your way through the sector with success – the 10 key do's and don'ts listed above should serve as your guidance in developing your own investment tactics.
Tanja Sznuk was a real estate agent for 8 years and she is still very much engrossed in the current trends and developments on the real estate market. Property investement is her special interest. Now she runs her own online shop http://www.sklep-intymny.pl/.
