The 5 Biggest Mistakes Real Estate Rental Investors Want to Avoid
The novice real estate investor looking to get back some of his stock market losses may think the time is right to get into the rental business and make a quick buck. Yes, many properties through out our country have lost upwards of 50% of their peak values of 2008. But before you invest make sure you avoid these common mistakes:
1. Trying to treat the rental business just like any other transaction.
The savvy real estate investor knows that the “flipper ” days (buy today and sell for a profit before you even close on the original transaction) are long gone and probably will not return any time soon. You will have to manage your expectations to allow yourself the time to succeed. You need to give yourself at least 6 months of working with real estate rentals before you can expect to make any positive headway.
2. No Cash Reserves.
As in any successful business, the two most important words in this business are cash flow! The forecasted monthly income that is generated from the rental property must exceed the total monthly forecasted expenses for that same property. This creates the positive cash flow that will allow you to make the proper repairs, accept a more qualified tenant and make the correct business decisions at the proper time.
3. Uneducated Investor.
Yes, I am sure many of you have heard the following… “Why waste any time or money taking any training course, I will just use the money for the down payment on the rental property that I want to buy… “This flawed statement ignores the common sense that most folks know… the more knowledge that you gain on a subject the more ready you are in making the proper decisions. There are many rental property investment techniques… do you know them all?
4. Any Real Estate Broker will do.
Most licensed real estate brokers are very capable of putting a contract together for the purchasing of the rental properties. They can ask you the following questions:
How are you going to finance the properties?? No down payment?? 3% down?? Do I qualify for FHA financing?? Do I know the local marketplace well enough to make the right deal? But not all licensed brokers are savvy enough to broker the deal that is right for you.
5. Lack of Action Taking.
Like anything else in life, many real estate investors talk a good game but many just lack the action taking skills to become successful. Lack of action and false expectations are the two leading causes for failure in this business. Now is the time to write down on paper reasonable expectations and carry out an action plan that delivers what you expect to happen.
These are exciting times for the real estate rental investor. Unfortunately, foreclosures will continue to happen and with the interest rates at their current levels, now is the time to take advantage of this unique opportunity. Hopefully you will discover the how to make your riches with rentals.