The Most Common Pitfalls to Avoid While Investing in Real Estate


Investing in Real Estate is a completely different ball game with its own rules, quirks and risks. Look, it is common knowledge that you should be undertaking some sort of investment. Make your money work for you, secure your financial future, etc. You’ve heard that. But where should you invest your money? One of the more popular modes of investment is in real estate. Let’s take a look at some of them.

1. Guaranteeing that you’ll have a cash surplus from your property.

If you’ve purchased a property as an investment, it stands to reason that you should make some money off it. But a surprising number of investors overlook this basic arithmetic. If the income you earn off the rent from your property is less, or almost the same as the expense of maintaining it, you will have little to show for your investment.

2. Wildly overestimating how much you might earn off your purchase.

If you’ve never really learnt the finer points of making a deal before, you might be talked into an overestimated one by your broker. Make sure you have the correct (not the inflated) idea of how much you are likely to earn, and how much you will have to spend each year.

3. Underestimating the cost of renovating your property.

If you’ve never really been in the real estate market before, your brokers or contractors might give you a low figure for how much it will cost to renovate your property. But once the work starts and you see the costs shooting up, you might be in for an unpleasant surprise.

4. Mistakenly assuming that real estate is like any other form of investment.

Every form of investment is its own separate beast. Real estate is not like stocks or bonds. Here, you are dealing with less-than-ideal tenants, negotiations, community restrictions and different maintenance costs. You can’t invest in real estate in a hands-off fashion like you can with other avenues. Look at your purchase as you would a business asset – it needs time and effort to make it grow into something meaningful.

5. Mistakenly assuming that real-estate is a low-risk proposition.

This is one of the most common misconceptions about the real estate market, and one that has been proliferated by brokers and other companies involved in the business. There are loads of risks involved with purchasing properties, and you need to put yourself in trusted hands to make sure you avoid financial losses.

6. Taking the advice of armchair real-estate investors.

If you’ve ever been out with your friends or colleagues who mused about how great it would be a property in some area, and how it would be a complete no-brainer to invest in it, take this advice with a grain of salt. Unless the person who’s talking is a bonafide real-estate investing expert who has the figures and returns to back up their claims, don’t let yourself get swayed.

In summation, these are mistakes that a lot of people who invest in real estate make, and if you want to ensure that your money-producing assets continue to grow, make sure you pay attention to each and every one of these. It’s better to prepare for every eventuality than to be caught off guard.