So, you’ve seen the umpteenth infomercial with that guy with his neatly pressed white T-Shirt, grinning broadly while swinging the field of real estate investment without money down full of money into wealth for 3 trillion dollars in easy payments (but only if you call now) and now you’re thinking, “wow this seems like a lot, I better get it fast before the special offer ends.”
Trap Number 1: Don’t Pay!
The essence of investing is finding properties that are undervalued. How do you know what is undervalued versus overvalued? Without going into technical details, the point is you need experience. Yes, like shopping for something else, real estate is basically one of the highest ticket items in the shopping mall of life. It is recommended to stick with one market, perhaps the closest to you as a starting point. Through your experience and asking the right questions, you will finally feel the pulse of the market you are looking for, and of course identify what is considered a good purchase.
Trap Number 2: Know the Market
Yes, you really have to do more work! This part really makes sense, but executes where the beauty and rewards come in. How do you make money in real estate? The most basic way is to buy low and sell high. So, from the first step, you have identified a general trend in home values, and are quite good at seeing homes that are undervalued. Assuming you got the house, you might want to profit from it by selling it to someone else at a higher price. How can you do this? Yes there are many ways. For one, most markets value value over time so if you want a long-term approach that will succeed. Increasing property will automatically increase house prices. Think about what the market wants, not what you want personally. You are not the person who bought it; You try to sell it to someone else at a price higher than what you buy.
Trap Number 3: Know Your Budget
It might be a good philosophy to live life carefully, but real estate is a serious business, and therefore diligent financial planning and budgeting is very important for your success. Don’t worry you don’t need to be a financial geek, but you have to be disciplined and aware of your budget from the start, or you might find you are learning that you need to do certain renovations or improvements, and don’t need to anticipate going to a certain cost. Think first about what is needed before actually advancing by investing in real estate.