Real estate investing is one of the most powerful methods to build long-term wealth. It isn’t without risk, however. Take a look at these four rookie mistakes in order to avoid common pitfalls associated with investing in real estate:
Mistake #1: Only looking at investment property value based on bedrooms, bathrooms, square footage or condition.
Pro Tip: Understand how location impacts investment property value. Real estate has a strong correlation between market knowledge and risk. Spend a little more time to truly understand the location dynamic of a property you’re considering. This can make all the difference in getting a great deal or not.
Mistake #2: Getting emotionally attached to a property.
Pro Tip: Look logically at real estate investments. Even if you can’t picture living there, you may close on a solid deal to add to your real estate portfolio. On the flip side, avoid being convinced by the “charm” of a property. Simply look at the numbers.
Mistake #3: Diving into house flipping to make money fast.
Pro Tip: If you plan on flipping houses, know the real estate market dynamics, both short- and long-term. While our Austin-area market continues to appreciate, house flipping has inherent risks. Make sure you’re familiar and comfortable with those risks before relying solely on rapid appreciation of property values.
Mistake #4: Buying and holding forever.
Pro Tip: While it carries less risk than the house flipping investment strategy, buying and holding real estate does include some long-term risk. It is a powerful way to build long-term wealth. However, it also requires excellent foresight and knowledge of market cycles and trends. While the Austin area is somewhat insulated here (promising economic landscape and business-friendly environment), make sure to do your research regarding an area’s long-term outlook.
Real estate investing is a useful tool to build and leverage assets. By heeding these pro tips and having a solid understanding of your local real estate market, you should be able to mitigate risk. As a property manager and REALTOR®, I am happy to review your real estate portfolio and make recommendations. If that’s interesting to you, please reach out to me anytime.
