With 2016 nearly upon us, it’s time to start thinking about how real estate investors can better position themselves for success. In addition to what you should be doing, it is equally important to know what not to do. Having said that, learning from those that have come before you can really help your business avoid making catastrophic moves. To that end, here are some of the biggest mistakes to avoid making in the coming year:
Overpaying for Property
You know it’s bad when a mainstream blog runs a post on 8 reasons real estate investors overpay for property, and proclaims 6 of them are good! Remember the golden investment principle: make your money when you buy. The second you overpay is when you start to eat away at your bottom line. There are reasonably priced properties out there, just don’t be the one that overpays for them.
Rushing to Beat Interest Rates
Rising interest rates have the stock market contracting, and many real estate investors rushing to the market. No one wants to end up paying a lot more for the same property later, or having to buy with skinnier cash flow spreads because they dragged their feet. Yes there is justification in wanting a lower interest rate, but the Fed just raised rates last week. Any attempt to beat the spread may be too late. At this point, it is better to take your time and mind your own due diligence. And don’t worry, rates are still relatively low.
At the same time, it is true that interest rates will have a massive impact on buying power and profitability. Do not underestimate how high rates could go, and how fast. Don’t neglect sound investment principles, but don’t be kicking yourself for the rest of your life because you missed out on this window of opportunity.
Passing On Deals Because Someone Else Found it Cheaper
One of the biggest turn offs to buying property today can be how much less the previous buyer found it for. Real estate wholesalers have been picking up properties for pennies on the dollar. In short, they add value and do work others can’t. They expect to make a modest profit on this, and that’s fair. You shouldn’t overpay. They get paid for their effort, and you can still get a good deal.
Taxes are up. Ironically, there are many legitimate ways for real estate investors to minimize taxes. They don’t require big investments, or even complicated structures and risky offshore shelters. Look for the easy and legal tax breaks available, and you’ll net plenty in the years ahead. The real mistakes come when investors neglect to take advantage of the tax benefits their business has become synonymous with. In fact, taxes are one of the biggest reasons people start investing. Do yourself a favor and make sure you are doing your taxes correctly.