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Common Investment Mistakes

Investing in real estate should be profitable and safe. A good investor will have plans and strategies that foresee any variables so that in any event, their investments are solid. If you are losing money in real estate, the only excuse you have is your own negligence and lack of understanding. Some of the most common real estate mistakes are outlined below to help lay a foundation of wise investment practices.

Balance sheets play a vital role in real estate investment. These important statements should provide information on the appreciation, equity growth, and tax benefits of an investment. Without such statements, managing assets carefully is quite difficult. The return on investment as well as the return on equity must be considered as well as the speed of wealth creation and tax efficiency. Without a balance sheet, an investor is operating their business with a huge blind spot that will cause them to make incorrect decisions. If you are not familiar with balance sheets, it is recommended that you ask an accountant to explain the fundamentals.

Learning to perceive losing deals and bad situations is obviously an asset to any type of investor. In the world of real estate, this may take years of experience as well as trial and error, but you will begin to see patterns surrounding certain investments. There are so many markets and ways to invest in real estate that any doubt should get your attention. This goes for partnerships especially. Not only should every precaution be taken to lay out the agreement in writing, but any partnership that becomes uncomfortable not longer needs to exist. Remember that this is an investment that effects you and your family's financial future.

Getting involved in an investment that is really over your head is probably the most common mistake among young investors. If the investment requires a little more capital than you can afford and is more complicated than is comfortable, it is better to wait for the right deal that falls in your parameters. A high-risk deal that is extremely taxing can end in frustration or even disaster. Yes, it is important to be open-minded to creative ways of investment, but it is more important to have a tight grip on basic, feasible projects. As experience comes you will begin to feel more comfortable engaging in higher risk investments due to previous success and failure. Be honest with yourself and you will know when the time is right to make a really big deal.

Avoid spreading yourself so thin with investments that you don't have the money to cover them and to live comfortable. Being strapped for cash will cause stress and unnecessary problems that can impact your ability to make profitable decisions. If you cannot cover losses from the gains on multiple properties, it is wise to get rid of something and be able to easily take care of the properties you have. A wise investor will get rid of anything that cannot presently be funded. There is a temptation to hold on in hopes that the situation will turn, but it is usually not worth the odds.

One final mistake people investing in real estate commit is not pursuing knowledge about the local real estate market. An investor should know everything about their particular market. Not having a thorough knowledge of the local market would be like a day trader not actually knowing the histories and current status of the stocks they are trading. Real estate does not have to be the gamble that many people fear. Real estate should feel like a solid investment. These basic principles should serve as a foundation to becoming a great real estate investor, but the education, research, and strategizing should never end.

About the Author: A true innovator, Von Sutten founded Ready Real Estate in order to put more money back into the pocket of the Dallas real estate investor.

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