INVESTING IN REAL ESTATE 3 COMMON BEGINNER MISTAKES ABHI GOLHAR
The importance of planning as the foundation of success in any business, and especially in real estate investing,
where timing is absolutely essential. On average, the amount of time between an offer being accepted and a
property officially switching ownership is roughly three to four weeks. In a hot market, this timeline can decrease to
as little as a week. An intelligent investor will utilize this time to create a detailed renovation plan, and devise a solid
market strategy, depending on whether the
ultimate goal is to flip the property for a quick
profit, or to rent it out and enjoy the fruits of
positive cash flow, passive equity growth,
amortization, and inflation. After taking ownership
of the property, not a single day should be
wasted. It should be planned accordingly that the
moment the keys switch hands, the renovation
work can start; that means ordering dumpsters to
be on site, making sure all the necessary
materials are acquired, obtaining any required
city or state permits for the planned work, etc.
A lack of planning isn't the only thing to keep in mind; improper planning can be just as detrimental to profits. One of
the most common aspects of improper planning are inaccurate calculations. In any endeavor where money is on the
line, numbers rule. It is essential and necessary to conduct a proper, detailed inspection, preferably accompanied by
a professional contractor. Too many newbies make the mistake of building a team without vetting the right
contractors and underestimating repair costs, and are later forced to subtract tens of thousands of dollars from their
profits just to complete the project, and that's assuming that the property sells at the projected market value.
And that brings us to the next and last common beginner mistake overestimating the value of the property. For
example, if you purchase a property for $100,000, and estimate that after repair costs, which will run up to
approximately $25,000, the property will sell for $175,000, the projected gross profit margin is $50,000. However, if
your projected sales price falls short of the actual sales price usually due to a lack of research that projected
profit can quickly diminish, or even disappear altogether. As real estate investors, we are speculators. And in order
to play the game, we must become proficient at all aspects, including valuing the current, asis value of the property
and the value of the finished product. One wrong move here, and you will lose your shirt.
The excitement of closing the very first deal leads many investors to rush through the process of acquiring the
property. Planning tends to be bypassed, renovation costs tend to be underestimated, and the projected final sales
price, after renovations, can be and usually is overestimated by optimistic and hopeful new investors or by
wholesalers and real estate agents looking to make the most of an opportunity. The ability to detect these mistakes
before they manifest themselves will simultaneously save you and make you a lot of money.