Simar Singh | 19 May 2022

5 Common Financial Mistakes In Real Estate Investing

5 Common Financial Mistakes In Real Estate Investing

It is rightly said that one should avoid keeping all the eggs in one basket in order to avoid disastrous results at times. That is why people tend to invest in real estate, as it is one of the most reliable states of investments that anyone can make. Owning something that is under constant development and demands, you can be very well assured that you will receive a good return on your investment from real estate. Nevertheless, suppose you are a new contestant in the field of real estate investing. In that case, it is highly imperative that you might encounter the most common mistakes that many people make while doing real estate investing. It's better to be on alert and beware of such mistakes so that you can make the right choice and avoid any kind of financial loss. 

It is common to see many investors making blunders while doing real estate investing; these blunders can be in any form and can leave a permanently harsh impact on their income for life. If this is a condition of investors, what do you think will happen to a person who is new to real estate investing and has significantly fewer resources to tackle any mishap. 

So let us discuss the 5 common mistakes one makes while doing real estate investing and how to avoid them-

1. Not doing thorough research

When we talk about the most overlooked aspect of real estate investing, not doing thorough research tops the list. The solution is simple, build a plan before starting your real estate investing. It is a process that costs a lot of money, irrespective of how attractive the deal can be. It is advisable to consider your option thoroughly enough and choose the deal wisely for your longer-term objectives. If it's the first time of yours in purchasing a property, you will have to look over plenty of things such as price, needs, future servicing cost, and the real estate potential. So, the slower the process the better the fruits hang. You must create a plan ahead of time instead of relying on the future to change its course. 

2. Estimation of financial analysis 

Nothing is more important than evaluating the finances at the time of entering into any kind of investment deal. The financial analysis involved in real estate investing includes taxes, registration fees, furnishing and interiors, cost of repairs, utility charges, etc. Prepare a detailed financial report consisting of expected and unexpected expenses and check whether you can afford them. You need to monitor where you need to buy a property based on your budget. A place should be near your office, children’s institutions, and a place with good connectivity. Prepare prior about how you wish to build a plot and if your area is neighbourhood-centric or who all will be your neighbours. All your financial choices should be based on these factors. One has the liberty to opt for a home loan, but before that, you should consult the bank and check for eligibility. You must have a good credit score in order to get a loan at a lower interest rate. If your credit score is more than 700, it is considered good and increases your chances of getting a loan. And you are more likely to get a longer repayment tenure. 

3. Not doing a background check of the builder’s reputation. 

To ensure the credibility of your investment in your hands, you must choose a reputable and trusted real estate developer. If you choose a renowned real estate brand, they will procure all the legal permits and documents necessary for the sale of your property. They also have projects that are RERA-approved, and this depicts transparency in all transactions. A well-experienced brand like Clicbrics will always go the extra mile in order to satisfy its customers. You can visit the website of the company and its social media pages. This will provide you with a complete picture of the brand. You can also seek feedback and reviews from previous customers 

4. Not choosing the right type of property. 

When you are firm on your decision about real estate investing, you should also decide what kind of property you want to invest in. If you are an investor, you can either buy a residential property or can invest in commercial properties. Many first-time investors overlook this aspect as they have significantly less knowledge about the real estate market. If you invest in the wrong property by mistake, your long-term plan will be affected. If choosing a good property to invest in, you will receive a good return, and it will be a good resale value. So based on your budget, you need to decide and shortlist based on your choice and seek help from trusted professionals to find the right bet to bet. 

5. Paying more than it's worth 

Once you have performed thorough research, market analysis, and financial analysis, now is the time to ensure that you are paying for the property, which is worth it in any situation. But if the property condition is not good, like pest attack, leakage, or cracks on the walls, you might want to invest more money once again when buying a property. If your intention is to buy and then rent the property, it is better to avoid leaving it empty for a longer time. Because a vacant rental automatically turns itself into waste and you will end up investing more for maintenance purposes. Moreover generating no revenue in return. So the tip is to be careful when looking for customers for your rental properties. Ask the tenants questions that are based on your property; the correct answers will ensure that the right people are coming to your property, and they will not add more cost with extra repairs. 

Another minor mistake that any new investor can make is that every new investor is similar to others. When you are investing in real estate, you should make that choice based on all the worst situations. Creating a maximum limit and setting aside a specific amount for your investment for emergencies and unexpected costs that appear out of nowhere is good. In most cases, set aside a Plan B. As a new investor, it would be wise to invest your money in the property. You can also take the advice of an experienced investor before starting your journey of real estate investing. We sincerely hope this blog has provided you with sufficient information on where you need to be thorough in order to avoid mistakes and become successful in real estate investing. 

Read More: Top 5 House Hunting Mistakes That One Must Avoid

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