Avoiding The Pitfalls of Real Estate Investment Properties

Buying a real estate property in which you don’t intend to live is one of the first steps on the road to becoming a property investor, and it can be hugely exciting to close on a property which you intend will make you money. But you know the old saying about investments; their value can go down as well as up, and there really is no such thing as a sure thing. So once you’ve signed the contracts, the work isn’t over. In reality, it hasn’t even begun.

Avoiding the pitfalls of real estate investment properties

Judging the market and knowing when to invest and when to divest are some skills a property investor will need. However, below we look at some of the pitfalls that can assail you when you buy for investment purposes. Knowing how to spot them and how to get past them is going to be essential if you hope to make a success of your real estate investments. 

Knowing when to sell and when to rent out

The most important thing about an investment property is that it makes you money, that’s what an investment is. There are two primary ways that a piece of real estate can make you money: you can sell it for a profit, or you can rent it out so your loan payments are covered with a bit left over. What is key here is knowing when selling is the best idea, and when renting would work for you.

Renting is considered to be a wise move if you expect the property to gain in value. Instead of selling right away, you can make some income from the place while waiting for it to reach the price where you want to sell. It’s almost never going to be a good idea to sell in a struggling market, unless you find a buyer who is motivated to pay above market value for a high-end property. A good time to sell in a rising market is if you find apartments for sale that could make a bigger profit. The successful property investor buys and sells at the right time.

Low demand and vacant property

The thing that real estate investors fear more than anything is a property sitting unused. Not sold, not being rented out, not making any money. If there is low demand in the market, it can be sitting unused for months, each of those months another blank mark on the rent book. Before you buy, consider what the statistics for the area say. If this is an area that attracts renters then you can feel confident that at the right price and with the right promotion, it will attract people sooner rather than later. If it isn’t, then only buy if you are sure you can sell for a profit.

Avoiding the pitfalls of real estate investment properties

Meeting your legal requirements

There are those who will say that this is the bare minimum, and yet…

When you buy for investment purposes, protecting the value of your investment is the priority, and that value can be dented by any number of things. A missed detail on a safety inspection, an undisclosed facility nearby that processes chemicals… you may even fall foul of the laws on what form of mortgage you must have if you’re planning to rent a property out. All of these things can have legal and financial repercussions, so it is essential to consult with a real estate lawyer and ensure that every legal loose end is tied up. This may be boring, but doing it first means that things will be much simpler when concluding a sale.

Updated: October 12, 2024 by Michael Kahn

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