There are two words that can cause huge headaches in the world of property ownership: deferred maintenance.
Essentially, investors and property owners often do not spend a sufficient amount to make crucial repairs and renovations – which in the long run can become more troublesome than simply keeping up with maintenance over time.
However, maintenance issues are far from the only misstep seen in this circumstance. Making a good living off real estate in any economic environment requires avoiding the classic mistakes that all too often see the light of day. Here they are, and though there won’t be a test at the end, you still get credit for taking notes.
- Lack of due diligence. Would you buy a car without test-driving several? How about a computer without researching specs? If the answer to these questions is a resounding no – as well it should be – then research is doubtless part of your purchase process. Right? Your specific type of research depends on whether you are a prospective homeowner, future landlord, land developer, or home flipper. However, what is universal is the need to ask plenty of questions about not only the home but the area in which it is set. Remember location, location, location.
- Going it alone. No property purchaser is an island. Even if you’ve closed a number of deals in the past, you may not be adequately prepared for the current market – something you need the help of experts to achieve. These include a sharp real estate agent, a competent handyman, a savvy attorney, an eagle-eyed home inspector, and a detail-oriented insurance rep.
- Getting the financing shaft. Exotic mortgages may largely have exited stage left with the blowup of the North American real estate bubble ten years ago, but we’re still seeing financing options designed to squeeze unqualified buyers into more home than they can legitimately afford. Keep in mind that opting for adjustable/variable loans or interest-only products may mean you’re going to hurt when interest rates inevitably rise. The goal? Knowing you have the financial resources to make payments should rates spike, or a Plan B to convert to a more conventional product if need be.
- Failing to adequately estimate expenses. The mortgage is just the beginning of what you should plan to pay when preparing to own a home. Keep in mind that you’ll be on the hook for property taxes and insurance, furnishing the home, installing elements such as new roofs and foundations, and keeping up with ongoing maintenance costs. Forget these items at your own peril – instead, make a list of monthly expenses and be sure they fit your budget before going house hunting.
- Paying too high a price. See again the idea of doing your due diligence before getting in too deep. It’s perfectly natural, particularly in a competitive market, to jump if it appears a seller may accept your bid, but that doesn’t excuse paying too much for too little. Don’t let your anxiety translate to an overly ambitious bid or you’ll be looking at years of debt as a result.
Here’s the bottom line: research is key before investing in property. Give it short shrift and you’ll feel the pain down the line.