Major mistakes to avoid while investing in real estate

Major mistakes to avoid while investing in real estate

Maduka Nweke

IT is often necessary for one to study an investment window well before dabbling into it to avoid losing money. Real estate can make a great investment choice for those who choose to make career in it. Many pieces of property and real estate can build value over time, bringing you back good return on your initial investment. You may also plan on renting or leasing a piece of real estate and enjoying that extra income. However, there are some dangers and common mistakes that people make when investing in real estate. Learning what these mistakes are, can help you avoid them and get the most out of your investments. It is advisable for instance, that before you invest in any real estate, you must need to fully research the property and its surroundings. Knowing all the details of the property will help you decide if it is worth the asking price, what future costs might be, and help to clarify long term investment goals. Make sure you can answer some of the following questions about any property you are thinking of investing in. 

For instance, you must be able to know what the area around the property is like. You also must know what the future of the neighborhood might be like; is the property at risk for flood or fire damage and whether the foundation of the building is secure and in good shape. You must be able to know what and what needs to be replaced in the home and what is new. You must be able to ascertain why the property is being sold. This is because for one to put his property into the real estate market for disposal, there must be salient reasons. Although, you may feel comfortable with making an investment, it’s always a good idea to seek help in finalizing your choice. Looking to other experts can help give you a better idea of how accurate your original estimates and plans were. Finally, try talking with some of the sector professionals before making your investment. This will open to you some of the things you may not understand because of your naivety in the area. You will also have to discuss with real estate agents to learn more about the value of the property and surrounding properties. Home inspectors will alert you to any serious issues that the property might have. Also repairmen can inform you of the expected costs that the home might need. Talking with an insurance and legal practitioners  can help you understand additional fees and processes that the property might require.

For you not to make a white elephant project investment, you must learn the true worth of the property. How much a property is really worth can be different from the cost of the home, so be careful to not overpay. To find the true worth of the property, compare the home to those of a similar style and design with about the same square footage, lot size, condition, age, and proximity. You will want to consider location, as well as the number of bedrooms and bathrooms. 

Nonetheless, bear in mind that two similar homes that are built in different locations can worth very different amounts, just as two homes in the same location but with differing numbers of square footage can be worth different amounts. Make sure that the homes you’re comparing match up on most, if not all of the variables listed above. When considering square footage, remember that the cost per square footage often decreases as the size of the house increases, so try to keep the measurements within 20 per cent of each other. When comparing lot size, the difference between the two comparison properties should be within 30 per cent, and they should be built within 10 years of each other. For this obvious reason, you must ask your real estate agent for information about surrounding and similar properties. Unless the property has something that sets it apart, the cost should be similar to surrounding real estate.

Another mistake you must avoid while considering investment in real estate is not to think more than your level can carry you. Before you set out to invest in any property, it’s a good idea to set limits for yourself. You should decide what you are financially comfortable with and capable of investing, before beginning to look for any available properties. This can help you know where and what to look for, as well as prevent you from going over your budget and incurring a bigger financial burden than you are capable of taking on. Remember that it is always easier to make first payments and buy into a project, it is also a huge problem after buying into such facilities you find out that you cannot fund the maintenance. This will drastically reduce the worth of the property in the event you want to dispose of it. In this regards, you must find a total amount that you are comfortable with, and should not go beyond this amount, even if the property seems appealing. You must leave room for adjustments, inflation, or property taxes rising because changes could occur within a space of time.

A lot of people who do not have financial history and sources of funding the project go into an investment and therefore bite enough they cannot chew. In this regards, one must cut his coat according to his cloth. You should know that before you commit to purchasing a property, you should be able to know how you will fund the investment. Cash and loans are common ways to fund property investments, but you need to know which will meet your needs. Also don’t begin to assume that you can’t invest in a property if you don’t have the funds in the bank. For those wanting to go through loan, you must check the interest rates before you sign the paperwork.

Ego could push one into making a part payment into a property. After you have made the part payment, the owner will assume you have the resources to go the whole loop. He will go disbursing and spending and when eventually you found you cannot go the loop and start looking back for your money, you will be disappointed that your money is no where near to give you. It is obvious that when looking for real estate to invest in, you may become emotionally attached to a specific piece of property or building. While this can be an enjoyable aspect of looking for your new investment, it can also be a trap. Becoming emotionally invested in your financial investment can cause you to overlook problems that the property might have. You can as a result overpay for it, or ignore the likelihood of poor returns if you want to sell it later on. 

To checkmate the above, you should avoid making investment decisions based on emotion because using your emotions to invest could cause you to make a financial error. For example, you may offer a larger down payment than you can actually afford.

The post Major mistakes to avoid while investing in real estate appeared first on The Sun Nigeria.

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