For first time real property investors, purchasing such investment might be one of the biggest achievements in their career. Aside from investments being a way to earn a passive income, it is also a manifestation of the fruits of one’s hard work may it be from his employment or business activity. Additionally, it is common for investments to have a huge monetary value. Thus, it needs careful financial planning to save up enough amounts to purchase such investments. However, having adequate funds will not suffice your property investment. As such, this is a reminder for starters that real property purchase is not a walk in the park and needs a lot of planning and research. The notion might be true that, in normal situations, property values tend to appreciate. Depreciation of values for property is rare so it is highly probable that values go up or stabilize at some point. Though this belief is valid and true in most cases, this belief also causes problems with real estate investing. So, if you are wondering about what mistakes in real estate investing that you must avoid, you do not have worry as we compiled a list of the common mistakes in real estate investing. Here are some tips and tricks to help first time investors in making the most out of their first real property investment.
Common Mistakes to Avoid in Real Estate Investing
- Not doing research before buying a property
Perhaps, you are getting impatient on your property purchase because you believe that the longer it gets to purchase a real estate, the lower the chances to acquire it a lower price, right? But rushing your purchase might do more harm and may cause your investment to flop. To simplify things for you, the belief that property values go up is mostly based on where the property is situated. With this, location is the primary consideration to gauge whether a property will be profitable in the long run. So, you can expect that in more developed areas, the property values are too high. A developed area means that it is accessible to opportunities and necessities like jobs, educational institutions, supermarket, transportation, place of worship and many more.
With this, if you are investing on a property in this kind of area, you are also paying for the accessibility it offers. Nevertheless, especially for the younger and working population, what attracts people the most to rent in your property or invest in such is the easy access to everything they need because we all know that commuting in the Philippines is such a hassle because a lot of time is wasted in getting stuck in traffic.
Aside from the location of the property, you should research more about the type of real estate to invest on. You need to know the purpose of the property you will be purchasing whether it is for residential, commercial, industrial, or other special purpose. By knowing its primary purpose, you will have an idea on the other factors to consider in your real estate investment decision. Nowadays, researching is easier because of internet. We are not saying that you should be an expert in real estate before purchasing such but having a background on the industry makes you a better investor because your chances of flopping is reduced or better if avoided.
- Too much reliance on yourself
Since internet provides access to a wide variety of information which helps you be knowledgeable on different fields, people have the tendency to rely much on these information to provide answers for their questions or provide clarity on confusing aspects. In investing, it is now enough to know the theories of investing and the dos and don’ts when engaging with investing activities. The reality about investing is that there are times that you need to incur losses in order to learn from experience and earn more profit for your next investments. That is why there are professional financial advisors which are considered as expert in this field to avoid these mistakes and share you some information which cannot be learned by reading books, lectures, or watching videos online. In the field of real estate investment, there are experts who can be consulted especially if we already have the funds and decided to purchase a real estate property. These experts are known as real estate agents or brokers. These professionals can be hired to guide you in your investment decision process. You may incur additional costs but take note that these are professional who are expert in the field of real estate investment. Why bother spending a little more if your investment is assured that it will be profitable or less likely to flop, right? In addition, their expertise speeds up your hunting for a profitable real estate investment. You just have to know the purpose of such property and list all of your preferences. The real estate agent or broker will help you to find the most suited property for your preference.
- Paying too much on the real property purchase
Finding the perfect real estate property to purchase might be the most time-consuming activity in the investment process even with the help of real estate brokers and agents. It is hard to find a property that satisfies all the standards we set for such acquisition. So, we often compromise as this is the reality with investment or any profit activity. With this, it is easy for investors to be tempted to overpay on the real estate even if it would be beyond its market value as long as it satisfies all the standards of the investor. This scenario is one of the overlooked mistakes in real estate investing.
While overpaying might be a mistake in investments, it may be a norm especially if there is a huge demand to the property you are eyeing. Potential investors will normally cast bids beyond the market value of the property in order to secure such especially if the cost they are willing to forgo is foreseen to be easily recovered with the potential high profitability of the investment. However, if you bid beyond your means, this is the easiest way to put your efforts into waste. If you cannot pay the long-term financing for such investment, you will likely lose the property secured because of mortgage or forfeiture.
So, it is better to analyze your cashflows in order to plan the maximum bid you are willing to pay for the property. Through research, you can also have an idea on the maximum price the people are willing to pay for a property. Additionally, real estate brokers and agents have an easy access on prices of real properties through their listings so their aid will be useful to decide on the ideal cost to pay for the property.
- Being attached with your property and not thinking of resale
It is understandable that when you already have a purchased property and you held it for a long time, chances are it satisfied your preference in acquiring the property investment. However, even if your real estate investment is for residential purpose, you should not disregard the idea of reselling the property in the future especially if there will be a better property to invest on. So, it is crucial to not be emotionally attached with your real estate investments. You should ought to see that holding on to these properties is business and you want to make the most out of it especially if there is an abrupt change in its market value. So, this is a reminder that you should always keep in your mind that there will be a time that you need to decide on reselling your property whether it is because of your financial needs, the market has stagnated, or you saw a new investment opportunity.
- Overlooking the hidden costs
Do you think that purchasing a property ends with paying its cost? This is one of the overlooked aspects or mistakes in real estate investing. The costs incurred does not end at the time you fully paid the purchase cost of your real estate investment. In the long run, you need to maintain its aesthetic and other aspects like the utilities. In addition to maintenance costs, there will be taxes to be paid during your ownership of the property.
The Most Important Trait to Have in Real Estate Investing
With a lot of aspects to consider in real estate investing, you might feel overwhelmed even though such is considered as one of few low risks investments to take. So, it is important for you to be a wise investor. Being wise means you have good judgment in every decision to take. You do not act according to your emotions. To put it simply, you are practical as you know that the value to be forgone is enormous and it literally costs a fortune at times. Having said that, if you are wise, you are less likely to commit all these mistakes because you know when to seek help or when to not commit on a purchase. Remember, this is still an investment meaning gaining profit is the goal. Hence, it is not enough that you acquire a property which satisfies all your standards and overpay on that property just to secure it right away. With profits in mind, you have to mix your buying decisions with compromising on your standards. In real estate investing, there is nothing considered as “perfect” real property meaning not everything in your list of standards will be satisfied by an investment property. However, if you properly account for practicality and put a compromise on your standards, there will be an investment property which might be labelled as your “best” choice.
Investing in a property is not simple like you think especially if you plan to be a real estate property flipper. In reality, more often than not, your first property purchase will not be perfect or the most ideal investment in your life. But you do not have to worry because you always have to start somewhere in order to prosper. Just be wise enough so you would not be too impatient so that your investment will be favorable even imperfect. A hand from the professionals will always be easiest way to prevent big mistakes in your purchase especially on high value real estate properties. It might be costly but again, why bother saving a little amount if the chance of higher returns will be more probable than not?
Aside from professionals, you can also look for reputable real estate developers. From their branding and achievements over the years, you will have a grasp if the properties they sell would be a profitable investment. One of the leading real estate developers in the Philippines is Bria Homes. Bria offers a lot of affordable house and lot choices and condominiums. It continuously expands through the years by providing the best comfort and relaxation that is unique to its competitors. It focuses on building residential properties all over the Philippines especially on developing provinces. In this way, it helps the people to acquire a property situated in an ideal location where necessary amenities are easy to access and taking into account the potential appreciation of the property values. Additionally, with its goal of providing the best for its customers, it continues to innovate its house models to suit the needs of its potential investors. What is unique with Bria is that it promotes socialization within the Bria community through its community center known as Sentro. With Bria, your property investment will surely not go into waste because the developer puts himself on the shoes of its potential investor. Ideal location and appreciation value? You do not have to browse a bunch of listings to hunt the best real estate investment to purchase as Bria offers numerous properties all over the country. All you have to do this decide on the location!