Investing in real estate seems to be so easy according to the media. Who has not seen a TV show or read a book on how to become a millionaire investing in real estate? Nevertheless, you have to watch out for a few common mistakes. Let’s have a look at a few.
1-UNDERSTAND YOUR LOAN
Before choosing your loan check if there are any hidden fees or points so you can anticipate any kind of surprise. Look out for rates since they can change any time from the first discussion with your bank to the day they lock the loan. Also make sure you know the difference between a fixed rate loan and an adjustable rate one. Nowadays, interest rates are at their lowest level in years, but we are expecting a sudden increase by the end of 2017.
2-BE OBJECTIVE ON YOUR REIT
Real estate investment funds are very attractive since they offer generous dividends. However you should be conscious that their face value as well as their dividends can drop like any other investment. When you buy a REIT always be aware of what you are exactly buying.
3-INVESTING IN BRICKS AND MORTAR
Investing in the stock market can be easier than in real estate. A few clicks and you buy a stock online. Investing in the real estate market is completely different. You have to know the inns and outs of the market and you have to understand that your investment is not liquid. A few click will not sell your house like you can sell your stock. It’s less dynamic, there are different steps to follow and every purchase is different.
The TV is full of shows about flipping houses. It looks so easy and so quick to buy and resell a house. But does it look like the real life? Before starting doing that you should really know the real estate market mechanisms and you should have a good purchase power. For example, if you buy a house in an auction, you need to pay all in cash and you won’t even able to see the interior of the house. Be careful, because when you buy with your feelings you might overpay the property and end up not making any profit.
You should always over estimate expenses to plan for the future of your property. Think about costs related to rental management, to repairs, to insurance, to commissions. One month without a tenant and you cannot pay your mortgage.