So, you want to start investing in Phoenix real estate to create a passive stream of income. That’s great news! How hard could it be when so many people do it. Some of those people even become real estate tycoons eventually.
Well, we all have to start somewhere and invest in our very first property. However, as with anything new, you’re inevitably going to make some mistakes. Fortunately, you don’t have to make the biggest mistakes that most first-time real estate investors make.
Thanks to this article, you’ll know what to avoid to make your investment profitable and successful.
1. Jumping in on a Hot Market
If you keep hearing about a hot real estate market somewhere, then it’s most likely too late to jump in on it. As soon as the news hits the mainstream media and people start talking about it, you’ve missed out on the great deals already.
Investing in real estate is partially luck, but mostly educating yourself about the market. When you learn to identify the beginnings of what could potentially turn into a hot market, then you’ll surely make profitable investments.
2. Not Calculating the Risks
Every single investment you make is a risk, whether it’s in the stock market or in real estate. To be sure you’re making the right decision and confirm you have the financial means to invest, you must calculate all of the risks.
For example, one risk you have when investing in real estate is that it remains vacant for months, and you lose money on the rent. Can you afford this loss? How will you get back on your feet if this happens?
These are important questions to ask and scenarios to plan for – just in case.
3. Failing to Create a Plan
Some real estate investors simply find a property they like and make a down payment. They focus on acquiring the property rather than what they’re going to do with it to create an income with it.
So, before you invest in your first property, make a plan. Write it down. Calculate your expenses. Calculate your revenue.
It’s during this time that you will discover just how much you can spend and how much it will take to break even. Remember these numbers because you’re going to base your decisions about the property on them in the future.
4. Refusing to Get Professional Help
There is nothing worse than an amateur investor who thinks he knows everything. You have to go into your first, second, and even third investment property humbly. Refusing to work with professionals like real estate agents, mortgage lenders, property managers, and even mentors is a huge mistake.
These people already have plenty of experience in the industry and have made plenty of mistakes on their own. Let them help you with your investment and guide you in the right direction.
5. Forgetting to Research the Location
You’ve probably heard the phrase “real estate is all about location.” And it’s true! The location of your property will affect everything from the price you pay to the price you rent it out for.
When you’re searching for an investment property, research the location where it’s located. See if there is an active rental market and if it’s predicted to increase. What changes and plans are coming to the area that will make it more desirable?
6. Not Considering the Tenants’ Needs
If you’re investing in real estate to rent it out to tenants and become a landlord, then you have to consider what tenants want in a property. You have to make the property comfortable, safe to live in, and desirable among tenants.
Adding desirable amenities such as a washer and dryer, updated kitchen and bathroom, and more can help you attract tenants and rent out the property much faster. Therefore, you reduce vacancy rates from the very beginning.
7. Don’t Realize the Maintenance Required
So many first-time investors focus on acquiring an investment property that they often forget about the property maintenance that comes with it after the sale closes. If you’re thinking of becoming a landlord, then you’ll surely be answering maintenance requests and making repairs.
This isn’t meant to dissuade you from purchasing a rental property. It’s simply a warning that you need to be prepared to maintain your property properly, especially when tenants live inside of it.
8. Relying on a Gentlemen’s Agreement
In the world of real estate, nothing is honored unless it’s written in a contract. Do not take someone’s word or handshake as gold. Get everything in writing to refer back to and use it as proof if needed.
For example, if you find an off-market property and the seller agrees to sell it to you for a specific price, don’t simply handshake on this. Get them to sign an agreement of sale as soon as possible stating the purchase price.
9. Failing to Do Your Research
If you haven’t ever been exposed to the real estate industry, you have a lot of homework to do. A good portion of this homework is to learn about the federal and local real estate laws. This is essential because if you break these laws as a landlord or investor, you could end up paying hefty fines.
For example, you’ll need to become familiar with the Fair Housing Act, which protects certain classes of people from discrimination when looking for housing.
10. Letting Emotions Get in the Way
You have to view your investment as a business decision. You cannot let your emotions get in the way of making important decisions. Try not to get too attached to properties you look at.
Instead, focus on the numbers and the facts. While the property may be perfect, the location may not be.
Real Property Management Can Help You Succeed with Your Real Estate Investments
Investing in a Phoenix rental property can be overwhelming and cause a lot of anxiety. Fortunately, you don’t have to do it alone! Real Property Management can take care of everything – and we mean everything.
As the trusted name for property management in Phoenix, our team of experts will fully manage your property — from acquiring tenants to answering maintenance requests to even handling evictions if needed.
Contact us to see how we can help you avoid the pitfalls of property investment and management while maximizing your rental income!