Mistakes — we all make them. We learn and grow from our own mistakes, or we take the time upfront to learn from the mistakes of others. Real estate investors are no exception. Real estate investing started before the Revolutionary War, so that gives us plenty of predecessors from which to learn. Americans love to cash in on financial freedom, including wise Tulsa real estate investing individuals and partners.
Here are some mistakes real estate investors make and how to avoid them:
1. They overlook the importance of the due diligence process.
Prior to purchasing commercial real estate, it’s vital to uncover detailed information about the prospective property. Avoid costly mistakes by taking the time to discover facts about the property that may initially be inaccessible or hidden. Examine zoning restrictions, potential liens, and encroachments. Fully inspect and outline needed repairs or reconstruction needs that your specific business or potential tenants may require—including their costs. Failure to perform a comprehensive due diligence process prior to property purchase could result in a less-than-desired profit in the future.
- Avoid post-transaction surprises by resisting the urge to rush into a real estate transaction without thoroughly turning over every stone to objectively evaluate the opportunity.
2. They get into a rush when selling a property.
There are recurring trends in the real estate market, one of which is moving too fast. Some real estate investors may try to offload a property too quickly. It’s best not to rush selling; instead, hold on to the investment until the timing is optimal.
- Avoid mistakes by simply putting into place a system by which you sell properties, and then stick with it. Choose ahead of time not to compromise the principles and steps you outlined, no matter how tempting the opportunity looks.
3. They don’t have a long-game when buying a property.
If your goal is the greatest profit, don’t sink all your capital into one property. Keep your eye on the end goal and establish a long-term focus. For example, it could be more profitable to buy 5 properties with some capital, and then have renters pay off the mortgages in under 15 years—yielding you profits from 5 properties with cash flow rather than just one.
- Avoid sinking all your capital into one property by stepping out and buying more properties to produce greater profits in the long run.
4. They tie themselves up with the many responsibilities of property management.
There are a great deal of responsibilities in property management. When investors manage their own properties, they can become distanced from their own investment dreams because their time is eroded daily with the responsibilities of property management. Do they care about their properties and tenants? Yes. But they would come out ahead by doing what they do best and delegating property management to free up their time.
- Avoid getting tied up with property management by hiring professionals so you can be free to use your primary skills to reach your goals.
5. They don’t do enough research on the contractors they hire.
This is mainly a rookie mistake. Take the time to do your own research on the contractors you hire for your remodels. Check with the BBB, and talk with other real estate investors. Contact those who have already used the contractor you are considering. It takes work but pays rich dividends to find out who is honest, thorough, priced fairly, and utilizes the best materials for your project type.
- Avoid hiring the wrong contractor by thoroughly researching your options. Once you find the best option and it proves out, give them your business repeatedly.
6. Over-rehabilitate a property.
If real estate investors over-improve the properties in which they invest, they risk having difficulty selling them if there is a sudden turn in the market. Remodeling investments of time, money, and hard work could be gone overnight if your properties are over-rehabilitated and the market changes.
- Avoid high-risk moves like over-rehabilitation of properties by assessing what other properties in the neighborhood look like. Create options for yourself by being conservative in your remodeling decisions.
7. They are overly optimistic.
Prudent real estate investors always prepare for the worst in spite of the fact that they hope for the best. If you don’t have the appropriate reserves, should the worst happen, you could lose your investment. Timelines can fluctuate, and costs that come with investments can be greater than expected or shift if there are surprises found after the property purchase. ‘Buyer beware’ fits the bill.
- Avoid being overly optimistic when making real estate investments by soberly preparing and planning prior to purchasing.
8. They neglect to save enough money for ongoing repairs and large maintenance items.
It’s vital to have realistic plans for both small and large maintenance repairs. Every investment has items that need to be replaced sooner or later. Don’t be caught off-guard without the money for needed repairs.
- Avoid this common mistake by saving each year at least 2% of the value of each investment property to prepare for repairs.
9. They neglect to garner the support of other professionals.
Zealous real estate investors often try to do everything themselves in spite of the fact that they may be investing only part-time. They may be short on time and challenged to overcome all the details involved in real estate investing. They end up reacting instead of acting. There are experts in every field you need. Simply build a working relationship with the experts you need to help you reach your investment goals.
- Avoid trying to do everything yourself by getting a clear sense of what the property requires, and assembling a team of support to which to delegate specific tasks and accomplish them.
Avoid these common mistakes by contacting McGraw Commercial Properties at 918-388-9588. Let us help you manage and expand your investment portfolio and business. In the meantime, view our available listings or get answers to your commercial real estate questions. Don’t lose out on the right commercial real estate deal for you—hire the right CRE team to meet your investment and business goals.