Real Estate Investment Mistakes That Cost Thousands

In the world of real estate investment, common mistakes can cost investors thousands of dollars if they’re not careful. When taking on an investment project, it’s important to know not only what you should do, but also what you should avoid doing at all costs.  

It’s important to remember that no one is perfect. When it comes to real estate investing, even the savviest investors make mistakes their first time around. While we do our best to guide new investors through the loan and investment process, there are still several mistakes we find new investors making that can cause a deal to go from profitable to break-even or worse.  

Common Real Estate Investment Mistakes to Avoid

Keep in mind the following real estate investment mistakes; most (if not all) of these common errors can be attributed to simple oversight. Staying focused and aware of all aspects of your project can ultimately save you from making costly mistakes. 

Neglecting Due Diligence 

It might be tempting to cut corners when you feel like the paperwork is time-consuming. And sure, sometimes it feels like the property inspections take too long. But there’s a reason why these steps are a part of the process, and skipping anything can lead to serious problems down the road and ultimately hurt your ROI. Things like property inspections, title checks, and a review of zoning laws are necessary in ensuring your project is built to livable (and legal) standards.   

For example, if you complete a new construction project that doesn’t follow proper guidelines, and an inspection is done before the final sale of the property, the sale could fall through. Not only will you have to spend even more to deconstruct and rebuild the issues, you’ve also lost additional time and the trust of a potential buyer. It could be months before the property actually sells.  

Underestimating Costs

One of the biggest real estate investment mistakes an investor can make is with their projected budget. The numbers on paper can be vastly different than the final costs of purchase, building, and so on. When crunching the numbers, it’s important to account for every soft and hard cost of a project, from taxes to construction materials.  

Notably, be careful not to underestimate costs like property taxes, insurance, and regular maintenance. Otherwise, your return estimates could be inflated. Removing the possibility of hidden or unexpected costs will genuinely save you thousands of dollars in the long run.  

Doing it All Yourself

You might be a superstar, but real estate is a team sport. While you might be tempted to do it all, it’s important to remember that you can’t do everything by yourself. A good network of professionals can help you grow and avoid costly mistakes. When putting together your team, you should keep note of specific roles and responsibilities needed to see through your investment project from beginning to end. While an investor’s network may vary, you want to consider connecting with professionals like the following:

• Real Estate Agent. If you’re planning on selling your property, having an experienced real estate agent will ensure it sells in a timely manner. 
• Real Estate Attorney. An attorney will protect you and ensure the transactions go smoothly and that no fine print is missed. 
• Home Inspector. Having a professional to make sure that everything is up to code will save you so much time and money in the long run. 
• General Contractor. If you’re flipping or building ground-up construction, you will need a trusted general contractor who can do the work on time and on budget.
• Certified Public Accountant (CPA). Having a trusted CPA on your team to advise you as needed can help you navigate complex accounting issues.  
• Insurance Agent. An insurance expert will guide you through the world of liability protection and all the issues that can arise because of liability.  

Questions to Ask to Avoid Real Estate Investment Mistakes  

Before you commit to a property, it’s important to do your research and ask as many questions as possible. One of the most expensive mistakes you can make is purchasing a property that has underlying issues that can lead to unexpected costs. Before signing the paperwork and buying a property, you should consider questions like the following:  

• Why is the house being sold? 
• When did the previous owners purchase the property and how much did they pay?
• What, if anything, needs to be replaced in or around the property?
• Does the property have any permit issues?
• Where is the property located and are there any known problems in the surrounding area? Is it in a flood zone?
• Does the house have any notably high-priority issues: foundation problems, termites, water damage, etc.?
• Does the location offer access to necessities? How close is the property to places such as grocery stores, hospitals, schools and businesses?
• Does the property’s city have any future plans or expected changes for the neighborhood or surrounding areas?  

Secure Financing and Partner with ABL  

Now that you’re aware of common real estate investment mistakes and how to avoid them, the next major step will be to get pre-qualified for an investment loan. And it’s important to work with a lender who moves as fast as you do to ensure you get fast, flexible funding when you need it. Whether you’re flipping an existing project, building from the ground up, or looking for long-term DSCR financing, Asset Based Lending has you covered.  

Ready to take the next steps and get the ball rolling? Turn your real estate investment dreams into a reality with Asset Based Lending. You can fill out our pre-qualification form now, which only takes a few minutes to complete. Once submitted, one of our loan experts will reach out to you within a day or two to discuss next steps. If your deal is a good fit for ABL, we’ll be able to get you to close in as few as 20 days!  

Why wait? Pre-qualify with Asset Based Lending now.