ebook proof read april 25

10 Costly Mistakes to Avoid as a New Real Estate Investor
A huge mistake new investors make is trying to buy a fix and flip or a rental
property without enough money. When buying a rental, you need money for
the down payment, closing cots, repairs, and carrying costs. You also need
money for reserves in case there are vacancies or maintenance. If you don’t
have enough money for reserves you may end up missing payments and
possibly lose your rental property. Skimping on repairs will make a property
hard to rent and increase your vacancies as well as lower your rent. On a fix
and flip not having enough money means you can’t finish the flip. As a new
or seasoned real estate investor, you must have enough money to buy a flip,
pay for carrying costs, pay for repairs, and plan to keep the property for at
least six months. Investing in real estate can seem like a safe bet. After all,
you can touch and feel the physical asset, but that creates a false sense of
security, experts warn. Aspiring real estate investors can quickly get
themselves in trouble, turning potential gains into never-ending losses.
From underestimating maintenance costs to wrongly banking on
appreciation, here’s a look at two common mistakes new real estate investors
make:
Error No.1 Example: Underestimating the Cost
When calculating the costs associated with a rental property, many new real
estate investors will factor in the mortgage, insurance and taxes, but leave too
little room for maintenance costs.
Take Kathy’s rental property as an example: The house is valued at $380,000
and with a 20% down payment, the mortgage and interest payment is $1,585
a month. Add taxes to the mix and that increases to $1,895 a month.
She rents it out for $2,250 a month, which should mean she is cash-flow
positive. However, taking into account the landscaper, pool guy and a
property manager would put her in the red each month by $335. 49
10 Costly Mistakes to Avoid as a New Real Estate Investor