The top 3 mistakes new investors make
I’m preparing to teach a class on Investing at Greater Nashville Realtors on April 4th, so this is top of mind.
I routinely work with investors and see first hand how difficult this market can be.
You see the flipping shows on HGTV and the ads for the next real estate course that is being taught in a local hotel ballroom. All of these "shows" make it look easy to succeed at investing. Nothing is further from the truth.
If it is so easy, why are the promotors teaching you how to do it, instead of buying up all of the amazing deals in town.
Also, if it is difficult for a seasoned investor, then it’s double trouble for the newby. When you are new at anything, you tend to make a lot of mistakes.
So, I hope to save you some headaches by addressing the most common culprits.
Here’s the top three mistakes that rookie investors make
- The first mistake that I see people make is underestimating costs. New investors that plan on flipping properties often underestimate the cost to repair the home. This can happen for a number of reasons, but it’s mainly caused by a lack of knowledge. When you are planning a major repair, you have to have contingency plans in place. There are always surprises that are not in the budget or items that you forget to consider. These mistakes can quickly drive up the cost to the point where your project is no longer profitable. Investors that plan to rent properties often underestimate the cost to manage and maintain the home on an annual basis. Plug every dollar that will be spent into your budget and add some additional expenses for emergencies. You will be amazed how quickly it adds up.
- The second common mistake is not focusing on the best opportunities in the market. New investors want to focus on homes that are easy to repair and bring back to average condition to the market. They want homes that only need paint, flooring and appliances. Due to the limited inventory on the market, homeowners are competing for these properties too. Normally, home buyers want a home that’s move in ready. When there are few of these available, they will look elsewhere. Instead of selling at a discount, these easy to repair homes are now selling close to retail prices.
- The third common mistake is treating your business like a hobby. It’s easy to get upside down if you are not focusing on your mission. Make sure that you have a business plan, marketing, maintenance and accounting practices in place before you invest.
If you are ready to begin investing and do not know where to start, then give me a call today so we can talk about the best investment opportunities in the area.
The Daily Deal in Nashville is historic bungalow in downtown Springfield [just North of Nashville] that is Move-In ready and listed for less than $160,000.