Top Mistakes to Avoid in Real Estate Investing

Out of all investment vehicles, real estate has a good reputation of resilience and is considered one of the most lucrative yet safest investment types. However, it is not to conclude that the real estate market is completely risk-free.

If you're just testing the waters of real estate investments, you probably have a ton of questions as to how it works in the local market, what are the potential risks, whether is it really a safer money-making option, the interest rates, and how you will go about transacting with a broker or real estate agent, among others.

Let's tackle the risks of real estate investing and the mistakes most beginner and even experienced real estate investors make, and how they could be minimized, if not completely avoided.

Real estate investment risks: Avoid these mistakes

As mentioned, the real estate industry is a safer bet compared to other money-making markets such as stocks, especially in terms of volatility. But the lesser risks in real estate notwithstanding, it could be financially heartbreaking to commit mistakes that are actually avoidable. Let's talk about them more below.

Buying the 'wrong' investment property

When we say 'wrong,' it's that type of property that is going to make you lose a huge amount of money rather than giving you enough passive income. Even and especially in real estate, the law of supply and demand largely applies. Why invest in a property in an inconvenient location where supply is bounty but demand is lacking? Also, do not make the mistake of purchasing a property that does not have the necessary features that most home buyers and renters look for. Chances are, your property will be unoccupied for a long time and you will lose some money out of something that should be a source of income.

Getting too attached to the property

It's worth making mention of this since there are people who could get emotional with the property they're selling or investing in. It ceases to become a business venture once you get attached to your investment properties. For example, you liked the interiors so much, or there are certain features you'd personally want to have for your own residence. Think of your properties not as personal possessions but rather as lucrative investments that will help you attain financial freedom and stability.

Renting property to family (or friends for that matter)

Sure, renting it out to your family and friends is great if you are just getting started as a real estate investor. After all, they can be trusted because you already personally know them. And to be fair, they would likely pay you accordingly and issue their payments on time. But sometimes, it cannot be dismissed that some would negotiate for a lower rental price since, well, they are family. There is also the risk of conflict if your relationship with them is tarnished with personal issues down the road.

Ignoring property maintenance needs

Keep an eye on potential damages on the interiors of your property. Interior damages if discovered by potential tenants looking for a home are a major turnoff. Inspection of property maintenance needs is especially necessary after a major typhoon in the country, and the location in which your property stands is significantly affected.

Raring to make renovations

Property maintenance and making renovations as needed are a good thing. It is indicative of your seriousness and intent to provide quality property for future tenants. But then again, don't be too bent on making your property look too good that you run the risk of overspending on renovations alone. The same thing applies to residential homebuyers who just bought a new house and wanted to make renovations to fit the house to their liking. You may be spending too much already, so practice caution.

Failing to calculate high financing costs

Lack of due diligence in making research and plans before kickstarting your real estate investment is a recipe for failure waiting to happen. The idea that there is lucrative money in real estate is exciting, but do not fail to do your own homework or consulting a professional who could guide you with the process of real estate investing, discuss the risks, and devise an exit strategy to minimize financial losses. Negative cash flow is one of the most notorious real estate risks that can be avoided with prior careful research.

Not making the property available at the soonest possible time

If you're paying for the mortgage, you sure wouldn't want your property unoccupied for too long and not get any rental income. The advisable thing to do is to make your empty property available at the soonest possible time for tenants. The longer your property is unavailable for tenancy, the greater the risk of negative cash flow. Meanwhile, keep an eye on your property's maintenance needs while actively looking for prospective property renters.

Buying property beyond your economic means

It's always tempting to purchase and invest in a property that has ticked all the features you desire in a home, but they sure don't come at a fairly affordable price. Extra features incur extra costs, and you wouldn't want to avail something that would financially burden you. You may afford buying the house right off the bat, but costs don't just stop there. Do not buy a property that you wouldn't be able to maintain. There's always a right time for a property purchase, and that 'right time' is when you can be certain that you are financially stable enough to not worry about expensive price tags.

Lumina Homes: Where You Can Be Certain It's A Worthwhile Investment

For over 10 years, Lumina Homes has managed to expand its mass housing developments in 50 key locations from Luzon, Visayas, and Mindanao. It's a testament to its continued success as a premier provider and developer of affordable house and lot for sale in the country.

Furthermore, it was awarded by Pag-IBIG Fund as a top housing provider of affordable house and lot, which shall keep real estate buyers and property investors confident and certain that a real estate investment in Lumina Homes is worthwhile and the right choice. Experience getting a Lumina house and lot in the Philippines with exclusive perks and Lumina-signature amenities, or purchase property for rental income in a convenient location with high demand for affordable housing.

If you're looking for a particular property, visit our website to virtually inspect available physical properties and various home model units. Be a Lumina homeowner and real estate investor and make your reservations today!