The 6 Things You Need To Know To Avoid Losing Money In Real Estate

Investors who bought property between 2001 and 2007 lost money. These were years where prices aggressively increased, largely due to loose lending practices that allowed people to buy homes they could not afford using loans that were only temporarily manageable.

Well, no investment is without risk, smart and wise investors understand there are certainly precautions that can be taken to prevent or decrease the risks.

The following is a list of the things we’ve noticed often lead to tragedy. Dear investors, avoiding these mistakes will greatly grow your odds of real estate investing success.

Negative Cash Flow

The first problem preventing investors from winning the long game is buying a property that loses money every month.

If you want to make money in real estate, you should plan on holding an asset for a long period of time which will create a positive cash flow. You need to earn positive cash flow each month as this is easy for you when you exit the deal back into your hands.

Lack Of Backup Fund

If lack of cash flow is the first factor for losing money in real estate, then lack of reserves is the second factor.

Too many circumstances and unexpected costs that could not be predicted are involved in owning rental property. For instance, problems like HVAC unit going down, a roof leak, or a water heater busting, there will always be something you need to repair or replace.

Having a sufficient amount of backup funds during these times is crucial to your success. We suggest you keep 3 to 6 months of expenses in reserves for each property.

Think Unusual

As Warren Buffet stated, “Be fearful when others are greedy and greedy when others are fearful”.

Just because everyone else is buying doesn’t mean you should too. In fact, it may be the opposite, think differently.

The best deals most of the investors ever bought were purchased when no one else was buying.

Buying in Poor Neighborhoods

When you buy in an area where good tenants won’t want to live, you’ll be forced to rent to less than desirable tenants with low rent, lower credit scores, less reliable income streams, and a worse rental history.

Remember to avoid the temptation and only buy in areas where reliable tenants want to live.

High Renovation or Refurbishment Cost

Experienced investors assume their renovation cost will go properly with the budget and schedule. But, most of them are over budget.

To avoid this, make sure you plan and locate your budget properly, do research, note down the materials’ market price , then only start to do the renovation or refurbishment.

Failing to Educate First

Most of the investors who have lost money in real estate, the reason is they don't understand what they were getting into until after they had committed to buying a property or asset.

If you want to invest in real estate, that’s great! Please start by educating yourself now, before you’re committed, then use that information and data to help you select the best choice or deal.

No investment is without risk, but that doesn’t mean we need to stay in a comfort zone and do nothing. What you need to do is - Start by avoiding the 6 mistakes we’ve outlined here, read more articles or books about real estate and you should be well on your way to growing wealth through real estate.

Are you interested in investing in real estate? We can provide you with complimentary real estate advice including financial analysis, real estate market trend, location analysis, strategic marketing plan, and more on your property.

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