Real estate investing can be tricky business, but it doesn’t have to be! Check out this list of four major mistakes buyers make when searching for the best properties to serve as income producing investments.
Mistake #1: Poor Research
Researching the area is one of the most important aspects of buying property, since everyone who will rent or buy from you will start with an interest in the location and so should you. Study the best and worst locations for the type of property you want to buy before making a purchase. For example, great vacation home rentals will be located in a top tourism destination that is easily accessible, affordable, safe and has great infrastructure along with a wide variety of activities and entertainment options.
Mistake #2: Wrong Investment Outlook
One of the biggest mistakes property investors make is treating the investment like trading the stock market, especially when it’s located in a hot market with excellent appreciation, since it’s much better to take a long-term approach. Also, it’s generally best to buy investment properties that you can actually afford, instead of buying property just because the bank will loan you the money to buy it. Since not all investors have that much liquid cash on hand, it’s important to check out other options, like buying real estate with an IRA retirement account, which can provide a hedge against inflation and much-needed portfolio diversification to help beat the stock market’s unpredictable returns.
Mistake #3: Poor Marketing
Whether it’s through income producing property like vacation home rentals and apartments, or another type of property, the return on investment is directly related to how it is marketed. To do this effectively, it’s critical to determine how your end customers (renters and buyers) will make decisions and then reduce your target market accordingly. It can also be extremely helpful to work with an experienced turnkey rental property manager who is very familiar with the area where you are looking to buy and who can handle all the ins and outs of marketing the property for you. Finally, remember that the Internet has drastically changed the way properties are marketed, so it's imperative to stay on top of the latest online trends.
Mistake #4: Choosing the Wrong Agent
Regardless of what type of investment properties you are looking to buy, it’s important to recognize the value an experienced property investment advisor can provide. An experienced realtor will guide you through every step of the buying process, from finding the best investment properties to buy, to protecting your interests and ensuring that all required paperwork is properly submitted on time. To find a great agent, treat meetings with potential partners like any job interview and be sure to ask for references. Whenever possible, also try to meet with your agent in his or her office, as this will allow you to gain insight into how business is conducted.
What challenges have you experienced with investment properties? We’d love to hear your thoughts and comments below.
Would you like to know more about buying investment properties? Click the link below and read our Beginner’s Guide to Vacation Home Rentals as Income Producing Investments!