Real estate investing is a great way to make money and secure your financial future, but it’s not something that you can become an expert at overnight. However, paying attention to the common mistakes people make when buying rental properties can help get you started on the right foot and increase your chances of success.
Biting Off More Than You Can Chew
Buying too many rental properties at once, buying too big of a rental property, or trying to handle everything alone will quickly lead to burnout. It’s true that the more you do on your own, the more money you save, and having multiple properties helps diversify your portfolio, but don’t worry about that in the beginning.
Start small, with one property, and don’t be afraid to talk to or work with experienced property managers, real estate agents, and other investors. You may get concerned that they’ll be your competitor down the line, which is true. However, if you bite off more than you can chew or don’t get the help you need, you won’t have a horse in the race.
Underestimating Repair and Renovation Expenses
Before you decide to buy or bid on a property, come up with a comprehensive list of expenses to ensure you can afford it. There’s a lot more that goes into buying a property than just paying the mortgage–there’s insurance, repair, maintenance, possible renovations, property taxes, and more. Once you’ve done that, you can factor in monthly rent and calculate your ROI for the rental. While you have your calculator out, pay attention to what other contractors and maintenance specialists are charging. The last thing you want to do is overpay because they smell fresh blood in the water.
Forgetting To Keep Tenants in Mind
When buying a property, it’s important to keep in mind what group of tenants you want to rent to, whether that be families, college students, or seniors. This will affect where you buy property. For example, if you plan on renting out to families, you’ll want to focus on finding a family-friendly property near parks, hospitals, or the local elementary school. However, if you’re going to rent to younger adults, you may want to buy property near the local university, closer to a nightlife area, or any location where younger people tend to congregate.
Not Having a Plan of Action
Not having a solid plan of action is one of the worst and most common mistakes people make when buying a rental property, but what do we mean by a plan of action? It means asking yourself important questions and having the answers. What’s your purchase plan? How will you secure financing? What kind of property are you looking for? What’s the housing market like in your area? When you plan as much as possible and look into the nitty gritty details, you’ll make a more secure investment and become more knowledgeable faster.
If you need help finding your first investment or need help managing your Nashville rental, let Excalibur Homes help! We’re an experienced property management company located throughout the south, dedicated to helping landlords and property owners just like you.
