Real estate investing has the potential to be an enormously profitable venture for those with the work ethic and aptitude to learn its various complexities. This fact is especially true in Philadelphia: the state contains some of the most exciting investment prospects in the entire country, and that isn’t poised to change any time soon.
Before you make your first big purchase, however, you should familiarize yourself with some of the industry’s most common mistakes. Below, you will find industry tips based on advice from seasoned experts on how you should avoid falling victim to these pitfalls.
1. Sloppy Planning
Planning is the largest factor in whether or not a green investor sinks or swims. And that’s especially true in a market as dense and competitive as Philadelphia. You need an actionable plan before you get started with any of the more detail-oriented parts of the investment game.
The worst thing you can do is buy a property without an idea of what you’re going to do with it. Regardless of how many dollar signs you see when you’re looking at a property, if you don’t have a realistic plan in place, you’re setting yourself up for failure by acting on your impulses.
Andy Heller, an industry veteran and one of the authors behind “Buy Even Lower: The Regular People’s Guide to Real Estate Riches” said it best: “First, you find the plan, then you find the house to fit the plan.”
What Heller means here is that you should have a tangible investment model on paper well before you concern yourself with properties. A solid plan is a foundation for long-term success and consistent growth.
2. Poor Networking, Overwork, and Taking On Too Much At Once
New investors are often smitten by the excitement of the real estate world on their first few ventures. Typically, this rose-tinted perspective results in burnout, overwork, and new investors taking on far more than they can handle. While you should always shoot for the stars, it’s crucial for you to remember there’s no need for you to get there on your own.
The real estate world is packed with pitfalls and hurdles to overcome. You’re already laser-focused on the investment side of things: finances, forecasts, growth, and networking to name a few. Adding home inspection duties, scouting, legal work, and insurance to your workload is a recipe for disaster.
Get in touch with well-seasoned experts, like highly rated inspectors and real estate agents, to get the best results while ensuring you’re focused on factors more relevant to your skills as an investor.
3. Short Sightedness and Profit Chasing
One of the reasons real estate is such an appealing prospect is the enormous potential profits it possesses. Becoming overly fixated on this payday, however, is one of the surest ways to ensure that you never actually make it happen.
There is no shortcut or foolproof method to secure riches in the real estate world, plain and simple. If you’re in the game because you read a book or watched an infomercial, you aren’t prepared for the diligence, work ethic, and wit required to become successful.
This entry might seem like a given, but it’s a shockingly common pitfall that many new investors stumble into on their first few investment ventures. A larger or more lavish property might seem like a guarantee when it comes to turning a profit, but more often than not, this line of thinking is flawed.
As an investor, your profit is more static than you might expect. In fact, the moment you buy a property, your potential profit is effectively set in stone. Poor analysis and misguided expectations can see lavish spending quickly turn to money lost rather than gained.
To steer clear of this trap, all you need to do is keep your initial investment prospects modest. Larger properties and investments are on the horizon, but at this stage in your career, you should focus on gaining experience and becoming more comfortable with taking calculated risks.
5. Poor Forecasts and Estimations
Knowledge is the most crucial aspect of making a wise investment. You can’t expect to find success in the industry without gaining a comprehensive understanding of the area in which you’re looking to begin investing.
In practice, this idea means that you shouldn’t limit your research to the details surrounding a single property or area. Study trends, demographics, median income, and other factors with as much diligence as you do the foundations of investment. Likewise, you should familiarize yourself with the basics of tenant screening and foreclosure purchases.
And that wraps things up. If you apply the above tips to your initial foray into Philadelphia’s real estate market, you will have far more success than you would have otherwise. And remember: consult a veteran real estate professional before making any purchases or commitments.