Investment in any form always involves some risk, but that doesn’t mean that a real estate investor can’t minimize or even avoid some of them. Even investors who have been in the game for years can make some rookie mistakes. Therefore, it pays to be particularly alert to some of the bigger risks. Here are a few that can really break the bank if you are not careful.
Going it Alone
If you are new to the real estate investment world, you may not be aware of the support you can get from other investors and professionals. In fact, there is a way you can be sure that you lighten the load while standing to gain a lot more over time. This is through utilizing a Real Estate Investment Trust. Rather than bank all your money on that new personal venture, you would instead ensure better security for your investment by going through a REIT. This is a company of individuals that collectively invest their finances in commercial real estate, or income-producing properties. This also enables you to sit back and let the experts do the needful. Of course, you can navigate the world of financial ventures on your own too, but you must quite skilled at it.
Not Doing Your Homework
As with anything you put your money into, you need to know what you’re getting yourself into. You especially need to know some background information before you make a decision, or it wouldn’t be called making an “informed” decision. Even if you are just investing in real estate for kicks, you don’t want to lose it all when you could easily have played your hand better. Educating yourself and gaining insight are not things you can do just once and think you’ve got it all together. Real estate is inherently tied to the motions of the economy, globally and locally. So you need to constantly stay on your toes. Failing to do so will likely put you in dire straits. Read articles, keep up with the news, and join a real estate investors association to make sure you don’t miss out on the right opportunities. Every move you make should be calculated and intentional.
Failing to Diversify
This is the biggest mistake you could make – putting all your eggs into one basket. This is the killer mistake that costs many an investor their very livelihood. It is not the kind of risk worth taking, no matter what the potential gains. You must also fully understand the implications of diversifying your portfolio. This is not about having several investments in different shopping malls or housing schemes. If the housing market hits a low point, you will have nothing. On the other hand, diversifying your investments by investing in different industries, countries, and types of businesses saves you from that. Instead, a loss in any one sector means you are still covered through all the others. Moreover, some of them could even benefit from an uptick if they are inversely tied to your failing venture.
These are just three of the biggest rookie mistakes in the world of real estate investment that you should avoid. Remember, there is nothing more important that keeping yourself in the know.
