There is no doubt that even the professional long-term real estate investors are prone to the occasional slip up, so don’t feel down if you make some mistakes. After all, it is all a part of the learning process. However, do keep in mind that it is definitely an error if you consistently repeat these mistakes and fail to learn from them.
It may just very well be that you haven’t actually made any mistakes so far (which you should), but nevertheless, in order to give you that extra heads up, here are a few of the stupidest slips you could possibly make as a buy and hold investor.
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There is definitely a lot of emphasis whizzing around the world of real estate investing on always having to get the best deals if you are a flipper or a wholesaler—and fair enough. In order to be a successful flipper or wholesaler, you will definitely need to be able to get great deals to earn that quick profit.
However, even if you are a long-term investor, this definitely does not mean that you should pay more than you should — after all, having a sky high mortgage equates to a payment that is far too high, resulting in some serious danger surrounding your cash flow. Hence, as a buy and hold investor, definitely do take the time to learn the best ways to buy low and snag the top deals. By simply trying to imitate the clever tactics of a flipper or wholesaler, you might just find yourself creating some great immediate equity on your investment!
One of the biggest mistakes that investors make is purchasing rental properties with very minimal (or even negative) cash flow simply based on their unsubstantiated hopes that these properties will appreciate in value. This, however, is an extremely risky move, as the market can fluctuate rather quickly, and it is impossible to always accurately predict. So it is strongly encouraged that you never purchase a property with your only profit potential being appreciation.
Pro Tip: In fact, sometimes the best thing to do is to purchase a property below market value or improve a property to add value. In addition to this, it is a good idea to purchase a property that already has a positive cash flow, as this will allow you to bring in income as soon as you rent out the house. So, since you are investing for cash flow, don’t worry about home values; if the home value goes down, it doesn’t really matter because you are making money from the cash flow and not the selling of the property. Remember, real estate investing is a long-term play.
Not Treating Landlording as a Business
This might come as a surprise to many, but landlording is actually a business. In order to keep your assets performing, it is best to maintain property upkeep, tenant relations, and finances. So while the majority think that landlording is an easy-going game of handshake agreements, emotion-based choices and loose regulations, remember that if you want to make it in the long run, you have got to be assertive!
We’re republishing this article to help out our newer readers.
Investors: Surely there are more stupid mistakes out there—which ones do you see made all the time?
Leave your comments below!