11 Rental Investment Mistakes to Avoid
11 RENTAL INVESTMENT MISTAKES TO AVOID
When it comes to rental investments, there are many areas where investors learn from their mistakes. One of our goals at Alpha is to lead you towards a path of success from the beginning. That is why we put together 11 rental real estate mistakes to avoid as you begin your journey of real estate investments!
Mistake #1: Thinking You’ll “get rich quick”
Real estate investment takes time; no secret formula exists to make millions in minutes. Before jumping into the game, make sure you are willing to put in the time rental properties require.
Mistake #2: Paying Too Much
Paying too much for a property can spell disaster for your investment. Money is made at the time of purchase. Remember to buy low and sell high.
Resource to Learn More: How To Correctly Value And Analyze Investment Property – Financial Samurai
Mistake #3: Not Getting the Numbers Right
Investors should have zero tolerance for skewed or incorrect numbers. Property managers need to know the numbers inside and out. Like any investment, a rental property is only worthwhile if it turns a profit. Start by finding out if the property income outpaces the expenses.
Resource: How to Crunch Real Estate Numbers Painlessly – Bigger Pockets Blog
Mistake #4: Receiving the Wrong Advice
Be careful when listening to others. “I know a great deal for you,” they say. Be warned; you (personally) need to run the numbers. It may be a deal of a lifetime, but don’t hand over control and let someone else tell you what a property is worth. Even if a family friend advises you to invest, this doesn’t make the property worthy of your down payment.
Mistake #5: Buying Only for Value Appreciation
Sure, property values may be on the rise, but this is not the standalone reason to invest in property. Rather, consider market appreciation as the cherry on top, with paying down the mortgage and monthly cash flow as the main course.
Mistake #6: Partnering With Others, But Failing to Get it in Writing
When in doubt, always get it in writing. Simple, but important.
Mistake #7: Not Pre-qualifying a Tenant
To avoid wasting the time of the landlord and tenant, pre-qualifying prospective renters is a must. Why? Because if you want to rent a property quickly you must find qualified tenants. Setting the tenant up for rental success is paramount. This helps both parties and is a necessary step in the rental process. The solution to potential problems is to set up a tenant screening system.
At Alpha, we are concerned about setting our clients up for success. We set minimum quality standards to help place the most qualified tenant into a property. These standards include:
- Income must be three times the monthly rent or greater
- No prior evictions or felonies
- Good references from previous landlords
- Satisfactory credit scores
Mistake #8: Not Having the Right Mindset
Investing takes time, preparation, planning and patience. Do you have the right mindset for real estate investing?
Related Post: Is Real Estate Investing for You? – Alpha Property
Mistake #9: Location, Location, Location
Never buy in a market you don’t understand. The right geographic location can set you up for success or suppress your portfolio’s potential. Take your time, analyze the market and purchase when the time is right.
Mistake #10: Being Unorganized
Organization is key in property management. Everything from financial information, taxes, rental income, and maintenance expenses must be handled with care.
Mistake #11: Never Getting in the Game
The final mistake (by far!) is to never invest at all. So avoid these investment pitfalls and get in the game.
Please let us know how we can help you avoid these rental mistakes.
If you have any questions feel free to comment below.