Real estate continues to offer appeal to investors looking for a good return. While the market has yet to fully recover from the recession, there are a number of promising indicators in both the residential and commercial sectors.
According to Joel Cone at U.S. News & World Report, home values and sales are expected to increase in 2015 and 2016, which bodes well for those looking to sell. For those purchasing or seeking to invest, given the increase in the residential prices, it is once again more of a sellers’ market, so investors should plan for a long term hold rather than a fix and flip.
While conditions are favorable for investment in the residential sector, the commercial sector is looking just as propitious in 2015. Potential investors should be aware of current trends in the market, such as the low supply of commercial real estate, rising capital flows, the popularity of multifamily properties and the growing demand for industrial space.
With any investment there is risk involved. Conducting the necessary due diligence can make the difference between a good and bad investment decision. In order to minimize risk, consider the top 5 real estate investor mistakes that could lead to a poor investment decision:
- Failure to do market research. A smart buyer will do their research before making a major purchase. The same should be said for real estate investors before investing. Make sure and do your homework, and don’t be afraid to ask questions. Does this deal make sense? Are there any problems with the location? Is this the right time in the market to invest?
- Investing in a property that is not a fit. While some real estate investors conduct the proper research on the property, they may not take personal needs or goals into account. It’s vital that you know what you want out of your investment. Is commercial or residential a better fit for you? Are you looking to make fast cash by flipping, or are you looking for a rental property that you will purchase and hold? Is the investment property within your budget? Can you handle the risk factors? Real estate can be a complex and unique investment. Before committing, make sure it agrees with your goals and interests.
- A failure to put a plan in place and follow it. Putting together a plan will increase the likelihood of a wise real estate investment. Determine how much you want to invest, what you want to do with the property and how long you plan to own before you invest.
- Going it on your own. Hiring professionals may mean spending more money—but it can save much more in the long run, and save the time it will take to go through the research, review and negotiation process. Working with a realtor or broker can make a significant difference. Remember, professionals can also include seasoned real estate investors. Seeking guidance from those who have more knowledge and experience in the industry can help reduce the chance of making a bad investment decision.
- Choosing properties that require too much work or time. Investing in real estate is a commitment that some aren’t prepared for. An investment property may require time and money for repairs and improvements. It can also require time finding and managing tenants. If an investor underestimates the time and expenses, it can lead to financial difficulties. Real estate isn’t liquid and requires a reliable cash flow, so when investing, you must have access to funding beyond that required for the initial purchase.