Has Homeownership Softened Your Resolve For Real Estate Investment?


Many of us assume that real estate is a fantastic investment, especially if we’ve already bought a house ourselves. After all, if you’ve done this once, what’s to stop you from doing the same and doubling your money as a result? 

The trouble is that, as countless homeowners find out the hard way, investment here is a whole lot harder than buying a house for personal use, and let’s face it, that’s hard enough! Rather, real estate investment is a very specific, hard-earned skill that’s more than worth the money people make from it. 

This isn’t to say, of course, that you can’t develop that skill and see your income soaring as a result. But, you need to let go of the idea that your previous home-buying experience will help you here. That’s because, in reality, personal property purchases often hinder rather than help. Certainly, attempting to invest with the same purchasing mindset could see you falling foul to the following mistakes. 

Limited market knowledge

When we buy a house for ourselves, most of us have a rough idea of which area of the market we’re interested in. And, whether that be semi-detached houses, flats, or bungalows, we typically limit our searches to those confines. As such, while we often do become experts, our knowledge is incredibly limited. 

By comparison, a wise investment means spreading your wings as far as possible, and doing your research with regards to prices of commercial real estate, apartment blocks, and even land. This is a step you simply won’t take if you assume that you know it all already, resulting in potentially lost profits and small-time focuses.

Buying with your heart, not your head

When we shop for personal property, most of us use one part head and two parts heart. After all, you need to get that special feeling from a house before you can call it home.

On the surface, it might seem logical that this same approach wouldn’t apply for investments, but you’d be surprised. Many first-time investors, especially those who plan to upsell, make the mistake of thinking that heart matters.

But, we’re sorry to say it – there’s no room for heart in real estate investment, and this mistake could cost you big bucks. Instead, you need to use your head in every stage of the process, and even go as far as seeing properties as blank spaces in areas worth your money. 

Focusing too far into the future

Even personal property is an investment of sorts, but don’t make the mistake of thinking that it’s the same. After all, when we buy a property, we all know that it’ll be at least a few years before we can see our money back. And, that’s okay, because we plan to live there in the meantime.

But, this same long focus is never going to serve on the investment front, where short-term focuses are always the priority. After all, the faster you can flip/start earning from your properties, the better off you’ll be. 

In that sense, fixer-uppers that you can sell for more fast are best. You certainly aren’t going to get your real estate career off the ground with a perfectly lovely house that’s going to sit around. The only exception to this rule is if you intend to rent the property, but even then, buying in upcoming areas or making improvements where you can will only increase your income, and thus make investments more worthwhile. 

Misunderstanding the lending process

If you’re unable to invest in property upfront, you may be planning to take out a loan to get off the ground. There’s nothing inherently wrong with that until you consider that many homeowners who already have mortgages entirely misunderstand what borrowing to invest looks like.

In reality, the process is pretty different, and you’ll even want to seek out investment-friendly lenders to make sure that you get this right. What’s more, interest rates are typically higher, with lenders requiring both proof of purchase and proof of investment value before they’ll accept. 

By approaching this like a normal mortgage, you could thus pay a great deal more than you need to/fail to gain acceptance altogether. Instead, you once again need to research and forget what you think you know.

Conclusion

Is real estate investment forever out of your reach because of your bad home-buying habits? Of course not. That said, you will want to overcome these potential mistakes in the ways mentioned before they cost you in time, money, and wise investments.

 

Jeff Campbell

Jeff Campbell is a husband, father, martial artist, budget-master, Disney-addict, musician, and recovering foodie having spent over 2 decades as a leader for Whole Foods Market. Click to learn more about me

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