While any type of investment is serious, real estate investments are a bit more serious due to the amount of money that goes out of your bank account. A slight mistake in your analysis of the property you are investing in can result in a loss of hundreds of thousands of dollars. Here is a list of factors that many real estate investors overlook.
Most Commonly Overlooked Real Estate Investment Factors
The Rate and Time of Return
Big investments do not always mean big and quick returns. In fact, real estate investments require quite a lot of patience from their investors. It can take years and sometimes multiple decades for your investments to bear fruit. Even if a certain property has yielded great returns immediately after your investment, do not expect all other properties to do the same.
Being the One Man Army
If you think you can go from neighborhood to neighborhood and fully analyze all the details to value a property, you will be wrong. You need to have a team with you to be a good real estate investor. The first thing you want to do is create a network of real estate agents that can provide you up-to-date information about various real estate markets in real-time. Having someone with legal knowledge is also recommended. Additionally, you would want a home inspector too.
Not Considering Commercial Properties
You don’t always have to be a home buyer and make investments in residential buildings. In addition to having cash for houses, you might also want to allocate some money for commercial properties. You don’t necessarily have to be the only investor in a property. Using a method such as crowdfunding, you can own a part of the property with a small investment. This brings us to the next point.
REITs are not the only way for investors to invest in real estate. In fact, crowdfunding has become the new favorite for investors to put their money in the real estate market. Real estate crowdfunding allows you to invest in a property with a group of people so your investment amount is small and your risks are low.
Portfolio and Geographic Diversification
You want diversification in your portfolio as well as the location of the properties you invest in. On your portfolio, you want to have residential properties, commercial properties, vacant lands, rental properties, etc. This establishes you as a seasoned real estate investor. Secondly, geographic diversification is when you invest in properties in many different locations, which is easily possible with crowdfunding.
According to Corey Tyner of We Buy Houses Phoenix, with so much of the real estate investment taking place online, the issue of transparency has become even more important. How do you know that your investment company is giving you correct information? How do you know they are not hiding some crucial pieces of information from you? In short, you have to be thorough with your research of the company before you invest.
Always keep these factors in mind to secure your real estate investments. True knowledge comes with time so start with small investments. Do not put your entire life’s savings on the line right in the beginning.