Investing in real estate is considered to be one of the soundest investments a person can make, providing a tangible investment that avoids the insecurity of the world of stocks and shares and instead forges a financial future from brick and mortar.
With that said, real estate investment is not exactly an easy choice, and it’s certainly not a choice that comes naturally to people. Instead, most first-time investors have to learn as they go – which, given the sums usually involved in the transaction, is far from an ideal scenario.
As a result, we thought it might be helpful to outline some of the most common mistakes first-time investors make when going through the process of buying their first property – so you have a blueprint for what not to do when making your own purchase.
Mistake #1: Over-Optimism
It’s sensible for any first-time investor to want to focus on the positives of their endeavor; optimism is, after all, a beneficial trait. Unfortunately, optimism can also be the downfall of a new investor, as the simple reality is that few real estate ventures go exactly as anticipated. Renovations can be delayed; finding a tenant becomes problematic; there’s an unexpected issue with the neighbors or zoning to resolve… these issues and many, many more can throw a spanner in the works – and if an investor had expected a smooth-sailing experience, can be extremely harmful.
Due to this, it’s preferable for first-time investors to live by a simple motto: “hope for the best, but plan for the worst”. Avoid making assumptions and go through every area and ask “what if?” questions about the worst-case scenario, then plan ahead and make decisions based on how these scenarios can be overcome. Essentially, maintain your optimism, but make sure you have alternative plans in place just in case.
Mistake #2: Deciding to Buy the First Property They See
When a first-time investor has made the decision that property is the right choice for them, it can be tempting to try to dive right in with the first property they find that they believe is a viable investment opportunity.
While it’s not impossible that the perfect property will just happen to be the first one you see, realistically, it’s highly unlikely. The vast majority of investors will benefit from taking a little more time, perusing options with the likes of William Pitt to get an idea of the market, taking their time with viewings, and generally taking the entire process at a reasonable pace. After a decent amount of research and learning about the options available in your chosen area, it’s far more likely you’ll be able to find the perfect first property for your burgeoning portfolio.
Mistake #3: Committing to Too Large a Redevelopment Project
Buying a property that requires a little work is fairly standard in the world of real estate, and one that works well: buy low, renovate, then sell or rent for a higher cost in order to generate instant profits. However, the renovation phase tends to be the one that causes issues for first-timers; it’s not uncommon for the process to take far longer than expected (resulting in spiralling costs) and to cause a huge amount of stress. Some investors can find the process so stressful it puts them off real estate altogether.
As a result, select your first property wisely; rather than jumping in with a property that requires a full remodel, make sure your first ever property requires little more than a few interior facelifts. Such properties may not offer the same potential for huge profits, but they do allow you to accrue the experience you need to have for properties that will require more significant work in the future.
If you can avoid the three mistakes above when choosing your first investment property, then when you do make your first purchase, you should be able to be confident it is the perfect start to your real estate investment career.