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Five Common Mistakes that Beginning Real Estate Investors Make

March 27th, 2012

Blog post 3 27 2012

Beginning investors today have so many more advantages available to them then investors in the past. With the internet, blog posts, books, seminars and coaching programs it surprising that less than 1% actually invest in real estate. For new investors looking to get started, your timing really couldn’t be better with so much supporting material available it not the lack of information that hold people back but the amount of information out there.

This vast sea of information can be overwhelming and it in some cases can be difficult for someone new to avoid some of the misinformation that is out there touted as fact. This post is for all new investors looking to get started in real estate investing and to help you avoid making the most common mistakes by investor.

Here are some common mistakes that beginning new investors make:

1) Not having defined investment goals.

One should carefully consider what they are looking for out of any investment. One reason is because there are a number of ways to invest in real estate and choosing how you invest is made easier by knowing what you hope to get out of investing.

Real estate investing can provide several income options; creating future retirement funds, generate cash flow, large immediate payouts and long term equity growth. The advantage with real estate investing is it can also be very passive and active depending on your investing objectives.

Knowing what you want out of investing will improve your chances of success because you are more likely to purchase properties that can meet your investment needs and avoid investment factors that mean little in meeting your goals.

2) Looking only at the numbers.

There is much more to investing than the numbers. Location of the property is probably one of the most obvious, but is not as clear cut as just picking a province, state, city or neighbourhood. Two homes can be side by side and one can still be better located due to proximity of corner, neighbouring commercial space, environmental concerns of a neighbouring property, etc.

Other factors to consider – zoning, soil conditions, age of the improvements, demographics of the area, vacancy rates, police reports, building violations, wetlands, flood zone, etc. This is but a few of the non-numeric issues that should be considered when doing your due diligence on a property.

3) Jumping into markets without understanding them.

There is a lot of appeal to jump into markets that offer large cash flows on small investments. If you know and understand what is going on in the market these can be great places to invest. The problem is when you don’t know what is driving real estate values in a market. Market prices can seem like tremendous values as an outsider looking in but in reality be overpriced for the area.

It is very important to understand the real estate market where you plan to invest. Is the population growing? Are new jobs being created? What’s the unemployment rate? Is the area over or under built? What is the political environment? What are the schools like? These are but a few questions to consider. There are many more.

4) Being afraid to make a mistake – and doing nothing.

At some point an investor must take the leap of faith. You do your best to learn your market and understand what makes a property a sound investment. Often it is best to start with smaller investments to minimize the initial risk.

Being conservative is a good attribute to possess, however if you are too conservative, then you run the risk of being one of those people who don’t do anything at all. Even when opportunity knocks man still has to get up and answer the door.

5) Taking advice from unqualified people.

You wouldn’t take medical advice from someone who watches ‘Greys Anatomy’ or ‘All Saints’ – you demand a trusted medical professional,” Nagel says. So why would you take property advice from someone who hasn’t built a successful portfolio themselves?

There is a lot to know in the real estate world and it helps considerably to find good connections that can help support you in your investment journey. Look for people that have plenty of experience in real estate investing that can provide you with the right advice and contacts to help guide you through the property purchase process.


Michael Ponte

Michael Ponte, President & Founder

Prosperity Real Estate Investments

Phone: 604-882-6901