5 Mistakes to Avoid as a New Real Estate Investor
Real estate investing is a great way to earn extra income or to pad your retirement account. The profits you earn from real estate can be used to fund a business venture, pay for family vacations or to add to your real estate portfolio. But there are some pitfalls along the way you should be wary of. Here are five mistakes to avoid as a new real estate investor.
Choosing the Wrong Turnkey Provider
If you’ve decided to invest in a turnkey rental, you should know that you need to be careful which turnkey provider you choose. Some turkey providers are less upstanding than others. Some turnkey providers won’t offer the kinds of properties you want to have in your portfolio.
Just don’t choose the first turnkey rental provider you come across. There are lots to choose from. First, decide what areas you want to invest in, then find turnkey rental providers that offer properties in those areas. Finally, narrow down your list of turnkey rental providers by reputation and length of time in business.
Investing Your Life Savings
Real estate can be a profitable investment, but it’s not guaranteed. It’s a venture just like any other investment. You shouldn’t be investing your life savings in anything all at once, including real estate.
What you can do is to invest portions of your savings into real estate. Diversity is the name of the game; that’s the safest way to grow a steady, solid income over time. That way, if one particular investment underperforms, you’ll have other investments to offset any losses.
Borrowing From a Hard Money Lender
Hard money lenders have their place in the world. They come in handy when you have a sure bet but you need to get the financing to pull it off. Hard money lenders are also convenient when you need fast financing so you don’t miss out on a deal to another investor. But this convenience comes at a price. Hard money lenders have high-interest rates, and you can lose your asset if you default on the loan. You stand to lose a lot if your “sure bet” doesn’t pay out like you thought it would.
The best advice is to leave hard money borrowing to the seasoned, experienced real estate investors. As a new real estate investor, you’re much safer with traditional financing. You’ll get more favorable interest rates and longer repayment terms, for starters. If you’re a new real estate investor and you feel that hard money lenders are your only option right now, then maybe it’s a good idea to slow down and build up your savings so you can use a traditional lender in the near future instead.
Trying To Do It All Yourself
Smart real estate investing requires a lot of skills. If you’re going to get into rentals, you need to figure out which are the best markets to buy in. If you’re going to invest in REITs, you have to figure out which companies you can trust. If you want to get into private lending, you may have to figure out how to self-direct your retirement account. There are a lot of wheels and cogs to manage, and it’s a mistake to try to do it all yourself.
Use available resources to help you navigate the world of real estate investing. You can ask turnkey rental providers for information about why they invest in certain markets. You can read blogs about how to become an accredited investor. You can consult with your tax professional about ways to self-direct your retirement account in order to invest in real estate. You aren’t alone, but you do have to be willing to reach out and ask for advice or guidance when needed.
Leaving Easy Money on the Table
Sometimes the worst mistake that new real estate investors make is leaving easy money on the table just because an investment sounds different. One common example of this is private money lending. With private money lending, you act as the bank. Your money goes to fund real estate deals like refurbishing office buildings, building housing developments and more. It’s arguably the most passive real estate investment available.
You do need to be an accredited investor to invest in private money lending, but you may already be accredited and not realize it. Contact us to find out if you’re eligible to invest in one of our private money lending opportunities. Don’t leave easy money on the table.
These are five common mistakes you can easily avoid as a new real estate investor. Remember that real estate investing has helped millions of people attain financial freedom over the years. This type of investing could be your ticket to early retirement, passive investment or wealth building. If you’d like more information about how to become a savvy real estate investor, please don’t hesitate to contact American Real Estate Investments today.