The  5  Don'ts  of  Real  Estate  Investing  By  Giro  Katsimbrakis  November  13,  2013    Making   money   by  buying   and   selling  properties   is   always  possible,  but  it’s  never  easy,   especially   if  you’re   just   starting  out.   Everybody   in   the  business   has   their  own   strategies   and  tactics,  but  there  are  a  few   basic   do’s   and  don’ts   that   we   all  agree   on.   Here   are   5  standard   don’ts   that  you   should   always  remember  before  you  fill  out  any  paperwork.    Don’t  #1:  Don’t  Forget  to  Do  Your  Research  Before  you  buy  a  car  or  an  expensive  household  appliance,  what  do  you  always  do?  You  compare  different  models,  different  stores,  ask  a  whole  bunch  of  questions,  and  try  to  figure  our  whether  what  you  are  about  to  purchase  is  worth  the  money  you’re  about  to  spend.  Well,  the  due  diligence  you  put  into  purchasing  a  property  should  be  even  more   extreme.   Make   sure   you   learn   everything   you   can   about   not   only   the  home  but  the  neighborhood  it’s  situated  in.  Here  are  some  good  questions  to  ask:  

• Why  is  the  current  homeowner  selling?  (This  one  is  BIG!)  • When  did  the  current  homeowner  purchase  the  property  and  what  did  he  or  

she  pay?  • Has  any  part  of  the  property  been  recently  renovated?  Does  anything  need  to  

be  replaced?  • Are  there  any  unaddressed  foundation  or  permit  issues?  • Is   the  property   in   some  sort  of  problematic   area,   such  as  a   flood  zone  or  a  

hotbed  for  termites  or  radon?  • Is   there   a   commercial   site   near   by?   Will   there   be   long-­‐term   construction  

occurring  in  the  near  future?  • Are  there  any  problem  areas  in  the  surrounding  town?  •  

Don’t  #2:  Don’t  Get  Bad  Financing  Often,   investors   who   secure   adjustable,   variable,   or   interest-­‐only   loans   get   great  properties  they  otherwise  couldn’t  afford,  but  end  up  paying  the  price  down  the  line  when   the   interest   rates   rise.  Make   sure   you   either   have   the   financial   flexibility   to  make   the   increasing   payments,   or   you   have   a   back-­‐up   plan   to   switch   to   a  conventional  fixed-­‐rate  mortgage.  

 Don’t  #3:  Don’t  Overpay  Finding  the  right  property  can  be  time-­‐consuming  and  often  frustrating.  Sometimes  when  an  investor  finally  locates  a  a  place  that  meets  his  or  her  wants,  the  investor  is  anxious  to  secure  the  property  immediately.  Unfortunately,  this  anxiety  often  leads  the   investor   to   overbid,   taking   on   too   much   debt   and   having   to   make   higher  payments   than  he  or  she  can  afford.   It   could   take  years   for   the   investor   to  recoup  this   investment.   No   matter   how   desperately   you   think   you   want   a   place,  do   not  overpay.  Figure  out  what  other  homes  in  the  area  have  sold  for  recently.  Unless  your  desired   property   has   unique   characteristics   likely   to   increase   its   value   over   time,  keep   your   bid   consistent   with   other   sales   in   the   neighborhood.   If   somebody   else  bids   higher   and   gets   the   place,   don’t   sweat   it.   There   will   always   be   other  opportunities  out  there  and  it’s  all  about  patience.    Don’t  #4:  Don’t  Underestimate  Your  Expenses  When   it   comes   to   expenses,   mortgage   payments   are   only   half   the   battle.  Maintenance,  landscaping,  painting,  structural  changes,  fixing  appliances,  insurance,  property  taxes–these  things  can  add  up.  Many  novice   investors   forget  these  things  when   they’re   on   the   hunt   for   a   property   and   then   get   in   over   their   heads   in  expenses.  Don’t  let  this  happen  to  you.  Make  a  list  of  all  the  monthly  costs  you  can  think  of  and  try  to  estimate  the  numbers  as  honestly  and  realistically  as  possible–in  fact,  always  high  ball  you’re  expenses  and   low  ball  your   income.  Once  you  do  this,  you’ll  have  a  good  idea  of  whether  or  not  you  can  actually  afford  the  place.    Don’t  #5:  Don’t  Do  Everything  Yourself  A  lot  of  investors,  even  if  they’re  rookies,  think  they’ve  got  it  all  figured  out,  that  they  can  close  a  transaction  on  their  own.  They  think  looking  for  guidance  or  assistance  is  a  sign  of  weakness  in  an  industry  built  on  confidence  and  competition.  The  truth  is  no  matter  how  many  good  deals  you’ve  handled   in   the  past,   it’s  always  good   to  have  a  support  team  to  turn  to  when  things  go  awry.  In  fact,  a  smart  investor  uses  every  resource  at  his  or  her  disposal,  and  befriends  as  many  experts  as  possible.  At  the   bare   minimum,   you   should   be   connected   with   a   savvy   real   estate   agent,   a  reliable   handyman,   a   knowledgeable   home   inspector,   a   solid   attorney,   and   a  competent  insurance  representative.  If  you  have  at  least  these  five  professionals  at  your  side,  you  should  be  able  to  spot  any  red  flags  no  matter  how  subtle  and  avoid  crummy  deals.    To   sum  up,   the  bad  news   is   if  real  estate   investing  were  easy,  everyone  and  their  mother  would  be  doing   it.  The  good  news   is  as   long  as  you  do  your  due  diligence  before   you   sign   any   contract,   you   can   avoid   the   pitfalls   and   start   earning  wealth  immediately.