It’s easy to look at real estate and think that it’s a simple business for real estate beginners.
After all, you buy a house, move in, and then sell it for a profit after just a few years.
The reality is very different though.
There are many pitfalls for beginners in the world of real estate that can lead to big problems down the road.
Here are 9 mistakes real estate beginners make:
- Thinking housing prices always rise
- Getting a mortgage that is too big
- Not saving up enough for a down payment
- Skipping the home inspections
- Not finding the right real estate agents
- Waiting too long to make a bid
- Forgetting to plan for maintenance
- Getting pre-approved for one type of loan
Real estate beginners think housing prices always rise
- Thinking that housing prices always rise.
- Assuming that the market always rises, and therefore you should buy as soon as possible to lock in a good deal. This can be dangerous because if the market takes a sudden downturn, you’ll be left holding the bag with your overpriced house.
- Not knowing how to read the market: what’s hot and what’s not, who is buying and selling their homes on average—and most importantly: why they’re doing it!
Getting a mortgage that’s too big
One of the biggest mistakes that beginners make is getting a mortgage that’s too big.
If you want to buy an investment property, it’s important to get the right mortgage.
Here are some things to keep in mind:
- How much house can I afford?
- What kind of payment do I need each month?
- How long will it take me to pay off my loan (and what will my monthly payments be)?
Not saving up enough for a down payment
When it comes to buying a house, your down payment is the money you put into your house.
It can be as low as 5%, or even less if you want to use another source of financing(such as debt or equity).
The more you put down, the lower your interest rate will be on your mortgage.
Down payments are not the same thing as closing costs; they’re just one part of what’s called “the purchase price” of an item or service.
If someone buys something new with cash and then pays off their balance over time with monthly payments, this is considered an installment sale because there was no down payment required at any point during its life span(unless something went wrong).
Misjudging how much the house or land will cost to own
- You will not be able to afford the payments on a house.
- If you rent, then you can always move back in later if needed and not have to pay any real estate taxes or maintenance costs associated with owning property.
- Moving costs can really add up when you own a house, especially if it’s an older home that needs repairs or updates.
Skipping the home inspection
When you’re looking at a home, it’s important to check out the outside before getting inside.
Look for holes in the siding or leaks around windows and doors.
You want to make sure everything is in good shape before you start making repairs to it.
A good home inspector will help you figure out what needs repair and will tell you if there are any issues with the structure of your house that could lead to serious problems down the road like the design of the rooms and the spaces of the compound.
Not shopping around for insurance quotes
The cost of insurance is one of the most common expenses for homeowners, so it’s important to shop around before you buy.
Insurance companies offer different types and levels of coverage, so it’s worth comparing quotes from multiple providers before you settle on one.
If your agent can’t get you a quote within 5 minutes, then they’re probably not doing their job right.
Not finding the right agent for you
Finding the right agent for you is important.
If you don’t find one, it can take months and even years before you find someone who will represent your interests well.
Here are some tips to help make sure that happens:
- Find an agent who is a good fit for your personality.
The right person will be able to work with both sides of the transaction—the seller and buyer—and keep everyone happy while they close on their next home purchase.
In other words: don’t hire someone who doesn’t know how to communicate effectively with others or has difficulty working under pressure(or both).
This type of person would not be good at representing either party in any real estate deal because they’ll never get anywhere when there’s a conflict between the parties involved.
Therefore, they won’t be able to get things done quickly enough when needed most during negotiations over price points among other things like closing costs plus moving expenses…
Waiting too long to make a bid on a house
The last thing you want is to be the first offer on a house, only to have it fall through.
You’ll end up paying more than you should have and waiting another couple of weeks while other offers are competing for the same property.
The best way to ensure that your bid gets accepted is by setting a price that is fair and reasonable(this may mean lowering your asking price).
If there are multiple offers already placed on the property, however, then this strategy won’t work—and even if there weren’t any other potential buyers in place when you put in an offer, there’s no guarantee that theirs will be accepted either.
Getting pre-approved for only one type of loan, or by only one lender
You may have heard that getting pre-approved for only one type of loan, or by only one lender is a good idea.
A pre-approval is when a lender gives you an estimate of how much money they think you can afford to borrow.
If the amount that they say is too high for you, then it means that they think your credit isn’t good enough yet(and therefore can’t be trusted).
This could mean things like:
- No Income Verification Documents Required – If there are no income verification documents required at the time of application processing…you won’t get approved!
Missing out on tax breaks.
One of the biggest mistakes that real estate beginners make is not taking advantage of tax breaks for homeowners.
Tax breaks are available for both renters and homeowners, but if you’re a renter, it’s usually easier to claim them on your own income taxes.
For example, if you have a home in which all of the furnishings are included in its sale price and then spend more than 15% of its value on renovations that aren’t related to doing anything with your place(like adding an extra bedroom).
Then those renovations count as depreciating assets and can reduce your taxable income.
Forgetting to plan for maintenance and repairs.
You might think that you can start building your real estate portfolio and then have time to worry about maintenance and repairs.
But in order to be successful, it’s important for you to have a good plan in place for repair costs upfront.
For example, if you’re planning on flipping homes that need work, then make sure that you have enough money set aside for needed repairs and updates before listing them on the market.
This can save headaches later down the road when potential buyers find out about hidden problems with their investment property.
Real estate is a complicated area and doing it right means avoiding many pitfalls.
If you don’t know the market, and the law, and have a good agent on your side, you’re likely to make some mistakes in this area that can cost you a lot of money or even cause damage to your reputation(and/or property).
It’s important to note that there are many different types of real estate transactions: from buying a single-family home through listing an entire portfolio—including commercial properties—to purchasing condominium units inside an apartment complex.
Each type has its own pros and cons depending on whether you’re planning on living within them long-term or just renting them out for short periods until market conditions improve again.
We’re happy to help you avoid these mistakes and make the most of your real estate journey as real estate beginners.
If you have any questions about real estate investment, we’re here to answer them.
But if none of our previous tips have worked, don’t worry
We also offer a free consultation with our potential clients so they can walk you through the entire process step-by-step.