Real estate is one type of investment that most people wish to explore. We would buy houses to ensure we get to build equity as we pay down our mortgage. The problem is, first-time real estate investors are prone to making mistakes that are, in reality, so easy to avoid.
For one, many of us get caught up with searching for the perfect home. We go house hunting even before getting approved for a mortgage. Some would approach companies that buy houses; others go on hunting by themselves. Some would blow up their savings, while others ignore the location when purchasing their first property.
It does not matter if you are looking forward to investing in your first home or investment property. Knowing the best practices when making a real estate investment will help you avoid feeling regretful shortly after the purchase. Here are four examples of what you need to steer clear of to get the most out of your real estate investment.
Not Knowing Why the Seller Is Selling
Homeowners and property owners have varying reasons for selling their property. One might be suffering from financial challenges, which left them with no choice but to sell the house. Others may need to move to another location, prompting them to sell instead of keeping the property.
Some sellers want to downsize their lifestyle, and that includes moving to a smaller home. Some need to sell, so they will have enough cash to finance a bigger house. Some also sell their property to get away from the costly expenses associated with fixing the real estate.
Even if you have no intention of getting to know the seller, learn to ask their reasons for selling. This will give you an idea if there is much room for negotiating. If the seller wants to sell to avoid repairs or is in a hurry to sell, you can use this opportunity to reduce their asking price.
Buying a House Without Considering Your Spatial Needs
Only you can tell how much space you need on your property. If you are buying a house, you need to consider your current lifestyle and your plans. You can’t simply buy a big house because you can imagine all the different ways you can use the rooms.
The same goes with a tiny home. The idea of living in a small and simple home may spark your eco-consciousness. But if you allow short-hand desires to rule your decision-making, you can end up buying the wrong house for the wrong reasons.
Ask yourself if you need too many rooms on a property. Consider the costs of heating and cooling the space, the furniture you need for every room, and how much property taxes will be involved for the space. Also, don’t forget that more often than not, the bigger the property you buy and depending on the location, the bigger the costs of homeownership.
Skipping the Survey
Chances are, you will be investing in a home inspection. This is since every expert will tell you never to skip a professional home inspection. This advice is indeed gold since it can save you from future financial headaches.
But what about a property survey? You may personally know the seller and is in love with the property. But before you close the deal, it is wise to pay a small fee so you can learn where your property lines are at.
You can get in trouble for accidentally building structures in your neighbor’s land. You can avoid this by investing in a survey. Learning where your property starts and ends can give you a better idea if the price you will pay makes sense for the amount of land you will get in return.
Forgetting About the Costs of Renovation
Some real estate investors look for properties they can fix and flip. Since you already have plans to renovate to sell it afterward, you need to make sure you have enough funds to finance the renovations. If not, you need to explore other options, including finding another property to fix and flip.
The following are some renovation costs you don’t want to forget on your list.
- Renovation permits
- Electrical wiring or ducting
- Hardware replacements
- Post-renovation clean-up
- Debris or waste collection
- Last-minute changes
How much your renovation will cost will depend on many factors. You need to make sure you can make the most out of each renovation project to optimize your future return on investments. A home inspection will give you a better idea of the least amount of renovation costs you will need to prepare for.
A real estate investment, be it an investment property or your own home, can be a trick or a treat. You want to get the most out of your home investment. So make sure you avoid these common mistakes if you don’t want to end up feeling remorseful after the sale.