5. Underestimating repair and renovation costs
Many newer investors do not take the time to thoroughly research renovation and repair costs.
In order to make a solid return, you not only have to consider the price of the purchase, but how much needs to be spend to get a property rent ready.
Tip: Only update to fit the market
If your investment property is in a normal income neighborhood, there is no need to splurge on fancy trim work or high end appliances. Just make it nice enough.
4. Overestimating the rental income
Don’t just look at the Zestimate and think that is the rent you can get.
You really need to do research, speak to local experts, and pay attention to the time of the year.
Tip: The time of year impacts the rent amount
Typically October to February can be a very difficult time to find a tenant. By this time most children are back at school so its not a good time to move. And, cold weather and the holidays tend to get in the way.
Expect lower rents during this time.
3. Forgetting to include vacancy and management costs
There are a number of expenses that need to be considered when purchasing an investment property – purchase price, closing costs, renovation costs, carrying costs, and more…
Even if you self manage you need to take in consideration your time and effort as an expense.
Tip: Consider hiring a professional property manager
It may cost a percentage of your income, but you may find its well worth your time and effort.
Professionals know all aspects of this business and can save you time, money, and headaches.
2. Not budgeting for unforeseen challenges/issues
Be Prepared! You can remember vacancy, management, repair and renovation costs, but still miss something.
So, having a reserve is a really good idea for those unforeseen challenges and issues that are likely to come up.
Tip: Have enough reserves
If you have financing on your investment, we highly recommend having at least 3 months in reserves to cover those expenses.
1. Not consulting with market experts
If you aren’t familiar with the market, you can get yourself into a lot of trouble. We have seen investors purchase a property in an area thinking it will be a good investment and can rent to a niche market, but it is in a bad area and VERY hard to rent.
So network, talk to agents, talk to other investors, read, learn…
Tip: Find resources
If you are looking in the New Jersey area, we are always happy to have a no-strings-attached conversation because we like talking with likeminded individuals.
We also suggest attending local networking events and checking out BiggerPockets.
Questions about investing in real estate or analyzing deals?
Don’t hesitate to reach out, we would love to help!
