When you enter the real estate investing business for the first time, there are many things that go through your head. How to find properties, how to handle funding, how to make repairs, what to do about bank accounts, the problems with utilities, and many other things. So its not a surprise that there are many mistakes that people make when they are someone who is new to the real life Monopoly game of real estate investing, and if you are not careful, those mistakes can be very costly.
So to help you stay aware of what can happen, and what the mistakes are that new real estate investors tend to make, you will find listed below the five most common ones. If you know what they are hopefully you will keep yourself from making the same mistakes that so many others have made before you.
1. Combining Back Accounts – This is one of the biggest mistakes that people who are new to the investing and renting business. They combine the accounts and all of the money that they get from the rentals goes into their account. You might think that this is easier but it really can cause more problems than it is worth. When you put all of your money together, it’s hard to keep track of what is your money and what money belongs to the business. You may think that you have more money in your account to play with than you really do, and you might spend the money that really needs to be put back into the business. Then, when something happens with one of your rental properties you don’t have the money to fix it.
Another good reason why it’s a good idea to keep the accounts separate is for tax purposes. S separate business account is much easier to keep track of when it comes to figuring out expenditures than when there is a combined account.
2. Letting tenants get to you – This is another common mistake that people who are new to the real estate and renting business make. They allow the tenants to bully them and rather than taking a stand they stand back while they walk all over them. If you do this, you’ll find that you now have tenants who are late with their rent payments, complain about the smallest thing and call you at all hours of the night, and do everything in their power to throw their weight around. You can’t let them do this, or else you are going to lose all control of your business. Be nice to them, but make sure that you let them know who is boss if they get out of line. Usually they are just seeing how far they can push you and once you show some authority they will stop.
If you are really having a difficult time, it’s a good idea to consider hiring a property manager. They work for a percentage of the rent that is paid monthly, and if you can afford to hire one it’s a good idea. It’s worth it simply to get rid of the headaches that you have to deal with on a daily basis.
But do regular checks and make certain that the property manager that you hired is doing their job efficiently and well.
3. Spreading their properties too far out – Another mistake that people make is that they buy properties all over town. This is a big waste of time and of gas. When you go around doing checks on your properties, you could spend an entire day doing it because you are having to go all over the place to cover the bases. And if you have rental properties in another state, well, that’s even more time and money that you have to spend on traveling, and, depending on how far the property is, you may have to get a hotel.
Keep all of your properties in the general facility so that you don’t have to waste precious time and money traveling to them.
4. Procrastinating – Without this mistake, there would be a lot more people out there that are investors in real estate. They are always coming up with the excuses why they are putting it off, yet they are going to the seminars, watching video tapes, reading the books, and researching the market. If you wait for the perfect time to invest in real estate, you are going to be waiting for ever because there will always be something that you think will be a hindrance. So take the bull by the horns and take the leap of faith.
5. Buying large and expensive homes – A lot of people make the mistake of going for the huge, expensive homes when they invest in real estate. They look beautiful and they are something that really draws people in. But the problem with these types of homes is that they are very difficult to rent on a long term basis. The best thing to do is to buy homes that will appeal to the normal, everyday working person. More often that not they are the ones who for some reason can’t get approved for credit on their own and they are looking for a place where they can live the rest of their lives. Another thing that is appealing about these homes is that the utilities on them aren’t very high.
When you go into real estate investing, remember the five biggest mistakes that people make – combining accounts, letting tenants get to you, spreading your properties out too far, procrastinating, and buying large and expensive homes. If you can avoid those five mistakes that have been made by so many before you, you will be on a good start to doing well in real estate.