When you’re thinking about becoming a real estate investor, it can seem like it’s all positives. You can make lots of money and have freedom and flexibility in your life.
These things are true, but for all the real estate investing success stories, there are many failures as well.
The best thing you can do before you make any investment is do your research. Learn from the successes but also the failures of other investors, so that you can avoid making expensive mistakes.
The following are some of the biggest mistakes a lot of new real estate investors make when they’re just getting started.
Asset Protection and Tax Considerations
First and foremost, when you’re starting any new business venture, even if it’s not real estate investing, you need to protect your current assets. You need to structure your real estate business in a way that’s going to personally protect you from liability. You also want to structure your business in a way that’s going to help maximize the tax deductions available to you.
There are some great tax advantages available to real estate investors if they know where to take them and how to set their business up so they can get full advantage.
Not Learning the Basics
Working with professionals on things like asset protection is a good starting place, but you also need to give yourself the time and the resources to learn the basics before you do anything else.
So many new investors think they can wing it or go on gut instinct, and it just doesn’t work like that. Real estate investing has to be strategic, and you have to understand financial implications, or you can find yourself in a bad situation.
Lack of Planning
If you take the time to learn in the beginning, you’re more likely to avoid this mistake as well.
You have to have a plan. You can’t just buy a house because you love it or it’s a great deal. You have to know what you’re going to do first. You have to create the plan before you ever look at properties, and then, once you have that plan, find a property that fits within that framework.
It shouldn’t be the other way around.
Trying to Do Everything On Your Own
Finally, being a real estate investor isn’t a way to get rich quick, nor is it something you can or should try to do entirely on your own. You need a team of experts surrounding you if you want to make money and be good at what you do.
You want to work on building strong relationships with a real estate agent, as well as a lender and closing attorney. You also want to work with financial professionals who can help you in areas such as tax planning. When it comes to the logistics of remodeling and maintaining properties, you need relationships here as well.
You can try to do everything yourself, but you’re likely to find this isn’t a sustainable strategy.
Instead, try to find a good team of remodeling and maintenance experts who can help you take care of things while you focus on more strategic elements of your business.