Real Estate Costly Mistakes You Want To Avoid 

By - #DigitalMarketing
27/11/2019 09:58

Whilst like any other business, It’s far easier to lose money on rental property than to make money, no one sets out to lose money and having some guideposts about what you’re doing as well as mentor(s) or mastermind groups for advise and guidance really helps. 

On the surface, Real Estate Investing seems so easy. What’s not to like? 

Leverage , passive income ,  property appreciation,  tax benefits and more. 


Putting the attractiveness of Real Estate Property Investing aside, the reality of life as a landlord isn’t so rosy just like any business. Whilst it’s hard work, its benefits and rewards outweigh a lot of alternative investments if not all. 

It does however like most things worthwhile doing... 
  • Take time and 
  • Research and careful study to understand the business     
Some common pitfalls to avoid when getting into the rental property business. Yes, it is a Business. 
1. Looking for "somewhere you can see yourself living" instead of an Investment property 
  • Searching for a good profitable investment property is vastly different from choosing a home to live in. 
  • Finding the greatest, most beautiful house on the market or the most gorgeous vacant lot isn't the objective. You aren't looking for a house you would live in, you're looking for something that the average family would rent, appeals to the local market demand trends and ideally can fetch top rent for the lowest acquisition cost. 

2. Capital Appreciation pitfall - long-term value appreciation prediction 

One of the many advantages of real estate investing is that landlords can profit in multiple ways. 

  • From monthly rental income payments and 
  • In the appreciation of the underlying asset value - property capital growth 

Whilst the above is true, it’s a mistake to put too much weight on property appreciation. Yes, appreciation is an added benefit when a your investment property sold, however, in the meantime, the properties should be paying for themselves on a monthly basis from day one. The ultimate yardstick is your positive net cash flow and return on investment. 

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3. Partnerships 

A business is no place for ambiguity. Clarity on the partnership and professional relationship as well as written agreements are paramount. The only investing partnerships that succeed are those that are very well defined with everyone’s roles and responsibilities strictly outlined. 

Business is after all a team sport as long as the rules of the game are clear and adhered to and there is a mechanism in place to resolve any differences. 

See this short video on why teams or partnerships fail and what to do about it - The Five Dysfunctions of Teams 

4. Constantly raising the rent 

You may think that by continuously raising your rents, you’ll be able to make more money, even if it means more tenant turnover. But, in fact, the opposite is true. 


Think about all of the costs that go into vacancies, from fix-up repairs to updates, to marketing and more. All of these costs can easily outweigh any small gains in higher rent.


All that raising the rent on a current tenant does is force them to consider what else might be out there and make them more demanding. 


Keeping rent the same gives the tenant an incentive to stay and keeps them happy. 


The longer they stay, the lower maintenance they are, because they’ll be less likely to call you to fix something for fear that you’ll raise the rent. 
5. Tenant Profile or Criteria 
Emotion has no place in any business let alone, the rental business. 
It’s important to always think about the worst-case scenario: being forced to evict a tenant. Things happen, and sometimes a landlord has to take action. But can you? 
Clear ground rules or clarity for all involved is paramount. 
   

With all the above said, real estate investing isn’t rocket science. By going in eyes-open, seeking and paying for professional advisors as well as avoiding some of the more common pitfalls of novice landlords, your chances of success will increase exponentially. Remember, any business is a team sport! 

GIC Capital – Matching Capital With Opportunity  London +44 (0) 203 290 9019 

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