8 Money Pitfalls to Avoid When Investing in Real Estate

1. Repairs on Fixer-Uppers

Before you naively buy a run-down property, it's critical that you do your homework and thoroughly grasp how much it'll cost you. 

2. Insufficient Rental Income

If you want to produce cash flow from your investment, be sure that the rental revenue you can realistically earn covers the costs of your mortgage, insurance, and taxes.

3. High Maintenance and Utility Costs

When purchasing a rental property, always assume that your tenants will not take as excellent care of it as you would. Purchase long-lasting but fairly cost improvements.

4. Taxes, Fees and Closing Costs

Real estate commissions alone can eat away 6% of your income when selling a home. This is in addition to any taxes and fees associated with your sale.

5. Buying at the Wrong Price

Don't go after properties in a hot market, expecting they'll continue to rise in value. Instead, be patient and await the appropriate opportunity.

6. Not Reading Seller Disclosures

Seller disclosures are more than just required documentation. Disclosures will show you what repairs or difficulties a property has had in the past that may reoccur in the future.

7. Investing With the Wrong People

Always exercise caution when investing. When people disagree on what they want or how a contract is drafted, it can lead to misunderstandings and even potential legal concerns. 

8. Neglecting an Inspection

Examine any substantial repairs or postponed maintenance, especially for major items such as plumbing, electrical, foundations, and roofs.