Buyer Beware: 6 Real Estate Investing Mistakes to Avoid

House flipper - real estate investing mistakes concept

Good real estate investors aren’t successful because they are lucky. Finding and buying houses isn’t like buying lottery tickets. It takes careful planning, preparation and analysis to purchase properties with strong investment potential. Then, it still takes a lot of skill and effort to make them profitable as rentals or flips.

We’ve all heard the saying “buyer beware.” Here are 6 real estate investing mistakes you will want to avoid:

1. Overpaying for Property

This is a pretty obvious one. If you pay too much for the house, there won’t be a lot of meat left on the bone to generate a worthwhile return on investment (ROI). This may be an okay plan if you are dealing in quantity, but for singular investments it’s a good way to end up wasting a lot of time and money. No matter how much you want a particular property, don’t overpay for it. Set your budget and stick to it. If the numbers don’t make sense, move onto the next opportunity.

2. Poor Analytics

You have to run detailed property analytics on any house you are considering purchasing. Know the top end of your price range. Estimate all the costs and time associated with renovations and repairs. Be conservative in your resale or rental price expectations. Make sure the profit potential far outweighs the expenses before making your offer.

3. Underestimating Property Condition

This is a common mistake we see from rookie real estate investors. They see a “fixer upper” with “good bones” and underestimate just how bad things are. They end up in a money pit situation with more repair and remodeling expenses than they expected. You should expect to buy houses in as-is condition if you want a good price and a quick transaction. However, you should perform your own inspections and have a good idea of the condition in order to properly estimate renovation costs and timelines.

4. Overestimating Property Value

Another common mistake is house flippers who assume they will be able to make a huge profit when the renovation is complete. They look only at the highest end of the resale price range and are then sorely disappointed when those high offers don’t roll in. Again, it’s smart to be conservative. Do your market research and set realistic expectations. Plan to get back the lower end of your resale price range. If this still allows plenty of room for profit, then it’s likely a smart investment. If it sells for more than that, even better!

5. Bad Contractors

Unless you have experience doing all the renovation work yourself, you are likely hiring contractors and subcontractors to handle the repairs and upgrades. Vet your service providers carefully and make sure you have full trust in them. Get clear budgets, pricing for materials and construction timelines. Every detail should be covered to ensure you don’t end up with a raw deal when all is said and done.

6. Poor Planning

It basically all boils down to poor planning. If you don’t have a solid investment plan and property-specific budgets, renovation plans and analytics, you are risking a bad real estate investment outcome. Don’t go into something like this unprepared.

For help with finding the best off-market properties and other helpful real estate investment resources, consider joining the PropertyLark home buying network. Fill out the form on the right to see if you qualify.