People often underestimate the risks and potential hazards of real estate investments, especially when they’re just getting started with passive investing.
Before you spend a dime, you should familiarize yourself with the real estate market and the world of real estate investments. With that in mind, here's some sound advice designed to help new investors avoid 5 common mistakes.
1. Sticking to What’s Familiar
Humans have a strong preference for things that are familiar. This is also true when it comes to real estate investing. But sticking to what you know — notably your favorite markets — isn't necessarily the best strategy for real estate investors.
You may live in an excellent investing market. However, you may be able to find greater economic opportunities for passive investing by exploring new markets.
Talk to seasoned investors to learn about the metrics they use to analyze different markets. You might learn a trick or two that can help you to spot incredible opportunities, even if they are outside of your immediate area.
Just like investors should diversify their portfolios, a passive real estate investor should spread out their investments in properties. This might mean investing in multiple housing types (single-family homes vs. duplexes and apartments, for example), various counties, or different price points.
Instead of sticking to what you know, do the research and follow the numbers. You’ll be glad you did! Once you have experience in a few different varieties of real estate investments, then you can zero in on what’s performing best for you and double down.
2. Becoming Stagnant
It's easy to lose the drive to grow as a real estate investor once you've achieved a certain degree of success and comfort. Portfolio development is critical for investors who want to build long-term wealth, enjoy the retirement of their dreams, or pursue financial independence.
Expanding your business is well worth the effort. This not only diversifies your risk — it also broadens and grows your passive income and net value. Think about how you want to improve and where you want to go in the long run. Set meaningful goals and stick to them!
3. Rushing into a Decision
When it comes to investing, there is a delicate balance to be achieved. While you don't want to wait too long to take advantage of a great opportunity, rushing into a contract is also unwise.
Never get into an investment without first conducting due diligence. For any type of investment you make, you should consider the risk, the rewards, the partners you’ll work with, and the work it will take to reach a payoff.
4. Relying on Emotions
When faced with emotion, novice investors tend to disregard defects, hazards, and facts. Whether you’re leaping into a new market or just eager to get started, when it comes to investing in real estate, it’s important to rely on objective research over the “thrill of the chase.”
As an investor, your intuition matters. But it’s important to keep a balanced head when it comes to an investment opportunity.
5. Hesitating Too Long
While some investors “leap before they look,” so to speak, others face the opposite problem. Fear can quickly get in the way of achieving your goals.
Many investors prefer to hold off on pulling the trigger on a new investment until they can gather all of the facts. While being well-informed and confident is important, waiting too long to invest can be detrimental.
When it comes to passive property investment, time is money. Make sure you're not paralyzed by analysis.
For example, if you wait too long to make an offer on a property, you could miss out to other buyers. If you wait too long to schedule maintenance on a property you own, you could face an expensive repair project.
While it's not ideal to rush, sometimes speeding up your decision can pay off in the long run.
To set yourself up for success, consider establishing a set of guidelines that you can use to make quick decisions. For example, you might set limits on the maximum ratio of monthly rental rates against the total property value for a single investment.
For Passive Real Estate Investments, Find the Right Partner
A high-quality partner can make all the difference when it comes to passive real estate investing. At Landmark Property Management, we help Chicago landlords to make the most of their properties. If you need help, have any questions, or are interested in learning from the best property management company in Chicago, don’t hesitate to reach out! You can contact us at Landmark Property Management via phone at 312-313-8553 or send us an email at office@landmarkrgc.com. As always, I hope we provided you with some valuable nuggets and I appreciate you stopping by!
