Investing in real estate can be a great way to generate a monthly passive income, diversify your portfolio, and capitalize on tax benefits. However, many new real estate investors make mistakes that can cause tremendous headaches and financial loss. These are the top 5 mistakes real estate investors should avoid in 2021:
Top 5 mistakes real estate investors should avoid in 2021:
1. Investing without researching
Research is a vital step in the real estate investing process, but many new investors fall into the trap of not doing their due diligence. Without a thorough understanding of property details and potential red flags, investors are at risk of financial loss, dealing with bad tenants, and unforeseen property expenses.
Before investing in a property, investors should conduct research to develop an in-depth understanding of the location, capitalization rate, appreciation value, and property conditions, among other details. The research process can be tedious, and it is one of the main reasons people shy away from real estate investing. Luckily, at Ark7, we handle property research, so you don’t have to.
2. Investing in the wrong area
Location matters more than any other factor when selecting an investment property. Some housing markets are hotter than others, and there are some markets that investors should steer clear of at all costs.
Choosing the right location is the key to a successful investment property. Factors like crime rate, proximity to local amenities, the quality of the nearby school districts, and public transportation access directly impact real estate value. Moreover, a neighborhood’s reputation or the history of a specific area could make or break a property investment’s success.
3. Underestimating costs
An investment property can be a great financial asset, but often, investors misjudge necessary expenses. Properties come with expenses like the mortgage, insurance, taxes, and monthly homeowner or condo dues, and these costs can pile up if a property remains without a tenant for an extended amount of time. If an investor underestimates costs or fails to find a tenant, the property could quickly become a burden.
At Ark7, we strive to find tenants for our properties as quickly as possible. Our Austin S2 and S3 properties were occupied by tenants within 24 hours of being on the market.
4. Neglect learning about real estate
Real estate investing is a complicated process that can take years of reading and experience to master. While you don’t need to be a master to start investing in real estate, it is best to plan on learning the ins and outs of real estate over time to increase your chances of being a successful investor.
Ark7 is the perfect place to begin your real estate investment journey because we handle the challenges that new investors typically face. We also provide articles to help our investors feel comfortable with the real estate investment process.
5. Not having an exit strategy
When investing in real estate, having an exit strategy is crucial because it can prevent lost profits and save you from being trapped in a bad investment. Investors should have a clear idea of how they plan to profit from a property investment before making a financial commitment. Researching and understanding potential exit strategies for each property you invest in could save you a substantial amount of money and lower your overall investment risks.
There are three straightforward ways to exit at Ark7, so users don’t have to worry about painting themselves into a corner.
Ark7 is here to help
Whether you’re a real estate expert or you’re just getting started in real estate investing, Ark7 is here to help you avoid common pitfalls. Check out other articles to learn more about real estate investing at Ark7.