It’s inevitable that real estate investors will make mistakes — especially when they are first starting out. Knowing some common pitfalls can help lenders make the right decisions when evaluating investors.
Forgetting about “soft” costs
“Soft” costs, like agent fees, closing costs and other small things that tend to crop up unexpectedly. Failing to account for these costs can be an unpleasant surprise that often rears its head when least prepared for it. Investors should budget generously for these to avoid coming up short.
Emotional decisions tend to be bad decisions. Investors must see the bigger picture and remain focused on the long-term. If decisions are based on long-term views and backed with data, that is more often than not a more prudent choice. And by taking a mechanical approach and setting rules for themselves, they can eliminate emotion from the equation and make better investments.
Asking the wrong people for funding
Finding the right investment opportunity only to realize that you don’t have quite enough funding to make it happen can seem like a setback. That is until they remember their social circle. Turning to friends and family for the money might be their first thought but this can be a bad move. As mentioned above, keeping emotions out of the equation paves the way for the best chances of success. They should research other options for financing instead.
Not sticking to it
Real estate investment is a fulfilling, but challenging industry full of ups and downs. Gaining a foothold as an investor comes only with dogged hard work, commitment and consistency. When are investors are feeling like it just isn’t working, they should take stock of their past accomplishments. Having a strong will and tenacity will help investors succeed.