Michelle Kam Discusses Common Issues to Avoid When Purchasing an Investment Property

Investing in a property requires a high level of commitment. Before purchasing, investors should be diligent in research, comparing properties, and having personal considerations with their choice. Without this initial groundwork, many people will lose their hard-earned money and even end up in real estate debt.

Investment property

Professional real estate broker Michelle Kam knows the common issues that investors face when purchasing a property for the first time. With many years in the real estate industry, Michelle has built her own agency City Accord Realty Inc. and furthered her expertise as a member of the Re/Max Brand in Toronto, Canada.

As an authority figure in real estate, Michelle Kam wants to discuss the common mistakes that new investors face when purchasing a property. She hopes that one can find a profitable investment in becoming aware of these issues even as a beginner.

Poor planning schemes

One of the fatal mistakes you can make when owning a real estate property is ineffective planning. Michelle highlights the three types of poor planners:

  • Haphazard planners: Those who think they can plan as they go, only researching after making their big decision.
  • Half-baked planners: The issue of these planners is not the timing of their research but the content. They do not cover the whole scope of what needs to be studied for their investment.
  • No planning at all: Some investors make an emotional decision about a property without doing any investigation. This points to a red flag of a lack of planning skills, leading to an investment flop.

Real estate brokers can help individuals plan for a property purchase. If you are new to the game of real estate investment, it is best to “stand on the shoulders of giants,” as they say, to avoid mistakes.

Real estate investment growth

Thinking you’ll be rich right away

Although understandably, real estate investment is of the foundational paths towards financial independence, this does not necessarily mean that a new investor will get rich right away. There are several aspects of one’s budget and financial standing that need to be considered when purchasing a property. Michelle Kam highlights the significant spending on a property:

  • Sufficient downpayment along with your savings and expenses: Don’t be so quick to jump right in when you have enough downpayment for a property. Having an adequate amount of money should also mean that you have spared enough for your savings and expenses.
  • Closing costs: Towards the end of closing an agreement, there are miscellaneous fees that can sum up to a large amount. Some investors are surprised by this amount, but it is important to be prepared with these closing costs.
  • Interest rates: If you are not paying full cash with most properties, you must understand your lender’s interest rate scheme. Whether it’s your bank or another loaner, you need to find an interest rate that’s competitive and works well with your financial standing.

The rule of real estate is putting in the “big money” and seeing gradual returns over time. Any true, lasting investment does not work by seeing gains right away. Returns happen when one puts in the work, calculates risks, and foresees growth many years down the road.

Not having solid professional relationships

If you plan to take your real investing strategy seriously, it is essential to have solid relationships with a team that can help you scout for potential properties. The best relationships in the world of real estate exist with mutual benefit.

According to Michelle Kam, this is another common mistake that investors face–thinking that they can succeed alone without the help of those already experienced in real estate. To gain a strong footing in the investment realm, you need the following experts in your team:

  • Real estate agents: They are your initial go-to experts in understanding the current market, considering your customized needs, and calculating the long-term value of your real estate choices.
  • Property appraiser: These experts can help you determine a reasonable valuation for the property, whether you’re buying or selling. A well-calculated price of the property means you will stay competitive in the selling market, as well as not paying exorbitantly on the buying market.
  • Maintenance team: This is especially important for investors who want to work on foreclosed properties. An honest, dedicated maintenance team to renew your property is essential for success.
  • Documentation team: Attorneys, notaries, and other members of a documentation team are essential to help you create and authenticate real estate files seamlessly for multiple properties.

Having a great team in place will save you a lot of time and effort while ensuring that you are not being taken advantage of as an investor.

Cash flow projection

Not reviewing how real estate cash flow works

Even with a good investment, many still fail if they do not properly understand real estate cash flow. Many real estate investors want to go on the route of having multiple properties and renting them out for passive income. There are considerations in doing this strategy because one should calculate the mortgage of the property and a competitive rental rate.

To add to this, the investor must also know about managing multiple real estate investments with a property manager. Unless an individual can commit numerous hours of time and energy in the upkeep and tenant management of the property, they must also understand the costs of maintaining rental through a manager.

There are also overhead expenses related to buying and holding properties. These include maintenance, taxes, repairs, association dues, and utility bills whether you own a commercial or residential property. Fully calculating your expenses and aligning them with your actual income can help you succeed as a real estate investor.

Wise Investing is Through Diligence and Networks

In all of these mistakes, Michelle simplifies that the main takeaway in real estate success is doing diligent research and forming networks. When you take time to research a property, having spending considerations, and form your team wisely, it is possible to experience a positive cash flow even as a first-time property investor.