Buying and holding real estate properties is a very useful investment strategy. In part, this is because real estate investors can have a meaningful impact on the performance of their properties, which is a huge upside that most kinds of investments can’t claim. However, it should also be noted that such properties can generate revenue streams for decades and decades to come, thus making them an excellent choice for investors with a long-term outlook on things. However, interested individuals need to remember that there is no such thing as a fool-proof investment strategy, meaning that they need to watch out for potential pitfalls when engaged in such activities. Here are five examples of careless mistakes that someone can make when buying and holding real estate properties:
1. Paying Too Much
One of the most common mistakes that real estate investors make is paying too much for the properties that they are interested in. This is a huge problem because a more expensive property means a bigger outstanding balance, which in turn, means more interest being charged on a constant basis. Unfortunately, there is no simple and straightforward solution for this particular pitfall because it can happen for a wide range of reasons. For example, someone might get too attached to a particular property when bidding on it with the result that they wind up going too far instead of quitting when they should have. Likewise, it is very common for real estate investors to just miss out on potential problems with a property, thus causing them to pay more than what they should pay.
2. Not Looking At Enough Options
The more properties that interested individuals look at, the better their chances of finding something that is suitable for their particular preferences. As a result, even though looking at properties is both laborious and time-consuming, interested individuals should do so nonetheless. This is because the better-suited that a particular property is for their investment goals, the better their chances of getting the desired outcome out of the whole situation.
3. Failing to Examine the Neighborhood
Most people have an intuitive understanding of the need to examine the property before making a purchase. However, some interested individuals have been known to overlook the neighborhood in which the property is situated, which has a profound impact on the property’s desirability and thus its value on the real estate market. This is particularly important because while real estate investors can do a fair amount to make properties more attractive, most of them can’t do much to make neighborhoods more attractive, thus making a good neighborhood that much more important as a factor when choosing real estate investments.
4. Failing to Remember that Rental Properties Are Businesses
Real estate investors who want to buy and hold need to remember that rental properties are businesses. Certainly, they can entrust the running of the rental properties to property management companies, but at the end of the day, they are still going to need to concern themselves with revenues, expenses, and other business matters on a regular basis. Simply put, if a real estate investor isn’t serious about being prepared to either run a business or choose someone reliable to run a business, they might want to reconsider buying and holding real estate investments because there are other real estate investment opportunities out there. Luckily, while learning to run a rental property can be pretty daunting, it is a very popular topic, meaning that interested individuals should have no problems finding sources of information with which to make the process that much easier for themselves.
5. Being Too Emotional
People haven’t come up with perfect mathematical models for predicting the outcomes of investments. However, there can be no doubt about the fact that numbers are a much better basis on which to make decisions than emotions, particularly since investors who let themselves get carried away by the sentiments of other people are notoriously prone for overdoing things. As such, real estate investors should never let their emotions get in the way of their financial decision-making. If they notice that they are either happy, frustrated, or otherwise affected by some kind of emotion, they should do their best to calm down before going back to reevaluate whatever situation they were dealing with in the first place.