You have determined why you are investing in real estate and what type of property can best help you reach your goals. Now it is time to take the next step toward making money – purchase an investment property. Hold on though, while this is an exciting step it will also play a huge role in whether or not you make any money. Take your time and avoid these potentially costly mistakes.
Not doing your homework: Whether you are buying a property as a rental or to flip you should know as much as you can about it 
before you buy it. How is the neighborhood? You aren’t going to live there but someone else is going to have to want to live there if you hope to make any money.
What condition is the house in? You may think it is a good idea to save $500 and inspect the home yourself but we think a professional inspection is worth every penny. A professional home inspector looks at houses every day and can find problems that even the most experienced investor can miss.
What are the costs associated with buying this property? From financing to closing to repairs make sure you know how much money it will take to get the property ready to sell or rent. Even if you plan on doing some of the work yourself, get bids from contractors for everything and include those bids in your cost estimate.
Failing to question the numbers: A popular quote in real estate investing is, “You don’t make money when you sell a home, you make money when you buy it.” That means you should check and double check every number you see while doing your homework. Look at the comparable sales your real estate agent gave you closely. Make sure they support the value of your purchase and, if you are flipping the property, the price you hope to get when you sell the house. Check your partner’s math and have them check yours. Find similar properties for rent on CraigsList and make sure the rents you see there are in line with what you hope to get.
Treating real estate investing like a hobby: Investing in real estate may be something you do on the side from your “day job” but you have a lot of money at stake and if you treat it like a hobby then your return on investment will reflect that. A hobby is something you do for pleasure and while real estate investing can be rewarding, pleasure is not a word that is often associated with rentals or flipping houses. The best investors know exactly how each day a house goes unsold or sits vacant will affect their bottom line. You should too.
Doing it all on your own: Smart investors know what they do well and what they should outsource. 
Hanging 1000 square feet of sheet rock yourself may save you money today but you will likely lose money tomorrow and the next day and the next day because your house still isn’t ready to be listed for sale or rent. The same can be said for managing the property yourself. Sure you don’t have to pay the property management company 8 – 12% of the rent each month but is the money you save really worth it when you have to evict a tenant who knows landlord tenant law better than you? Peace of mind that comes with not having to deal with every little thing that arises can be priceless.
Investing in real estate isn’t for everyone but with careful due diligence and planning it can be rewarding for anyone. Fortunately, you aren’t the first person to invest in real estate and many others before you have made mistakes that you can learn from.
