Property investment is a good way to diversify your portfolio to make it more resilient against possible downturns in the economy. The big real estate crash of 2008, however, tells us that real estate property is not always a good investment.
Here are some things you should avoid doing when buying land for investment.
Letting Emotions Take Over
Never allow your heart to rule your head when buying your first property. Sure, the house may look good and it may stir nostalgia inside you. It might look like your old childhood home that makes you associate positive feelings towards the house.
The problem with this is that you’ll be blinded to all the setbacks of the property, such as the fact that it lacks certain modern amenities, it has a failing foundation, and it’s not exactly as sturdy as it used to. Your emotions may tell you that it’s all part of the “charm” of the house, which is not how others may see it when seeking rental property. Leave the rose-colored glasses at home and stick to the facts when buying real property for sale in Eagle Mountain.
Going at it Too Fast
Another problem is that you might want everything done yesterday. You want everything tied up so fast that you only skimmed through the surface concerns and forgot to do some in-depth study of the house and the market for that property.
Don’t let haste cost you to waste valuable money. Go through the paper at a slow, steady, and thorough pace, taking into consideration all possible factors. The timing of the investment also matters. You would want to invest in property when you already paid off your own home or when other major expenditures or loans have been cleared off your table.
Forgetting the Human Element
If you’re investing in property that already has tenants, do not forget to consider the human element in hand. The fact is that while you might see this as a simple change of management, the tenants will see this as something else. You would want to reassure them of their situation, find out what kind of people occupy the place, and figure out what system the previous landlord had in place. If you want to change things, this is possible, but only after you’ve earned a good standing within your tenants.
Failing to Crunch the Numbers
There’s an accounting principle that says, “When you make estimates, it’s better to plan for the worse number.” This means that if the usual expense is $300 to $500, you should probably prepare for a $600 expense so that you have room to move within your finances.
This also applies in property investment. If you’re going to crunch the numbers, checking out taxes, cost of repairs, and the cost of paying off the property, you should set aside money that took into consideration in the worst possible scenario. This way, you’ll have room to maneuver.
Of course, those are just a few of the things to keep in mind when buying property for your portfolio. Remember that at the end of the day, you should only take on the responsibilities you’re sure you can afford.