5 Common Mistakes of New Real Estate Investors Billings MT

For new real estate investors, learning what mistakes to avoid can reduce risk and prepare you for success. Often these mistakes can be easily corrected with the right education. See the following article from REIClub to learn more.

"Real estate investing fever" has hit like a plague. Zillions of "newbie" investors are jumping on the bandwagon trying to make a profit after losing big in the stock market. I meet them all the time, and many are making big mistakes!

Mistake #1: Stock Market Mentality

You'd think after losing $7 trillion in the stock market, people would have learned! Nope, they are making the same mistake, which is assuming that what happened yesterday will happen tomorrow. Nine of ten new investors I meet say they are interested in real estate because they saw someone else make money from the rapid appreciation of the market over the last few years.

But, buying real estate solely for short-term appreciation is often a big gamble! If you buy real estate to hold for fifteen years or more, the chances are that you will come out on top. If you buy a property and flip it in within a year, you'll probably do fine, too. And, despite the risk, many people can intelligently time the "boom" of a local market (or subdivision within a market) and make a profit. But, if you buy a rental property for full-market price with break even or negative cash flow, you'd better have a backup plan if the market doesn't keep going up. Investing is a lot like surfing; if you don't know how to ride the wave, you will drown!

So, should you refrain from investing if you think the market has peaked? Absolutely not! You can find bargain-priced properties in every market, even the hottest. You can find low-interest rate financing that will increase your cash flow, so if values drop, you still are covered. You can plan short-term (six to twelve months) because markets rise and fall slowly. And, if you keep a cash reserve for your business, you won't sweat when the market tanks. You know that in the long run, real estate markets virtually always come back.

Mistake #2: Investing Blind

You'd think after losing $7 trillion in the stock market people would have learned! Nope, they are making the same mistake--blindly buying real estate based on bogus advice or complete lack of education. Real estate is one of the few investments in which risk is directly proportional to knowledge. True, it has a higher learning curve than investing in the stock market, but there's no proof that having knowledge of the stock market reduces risk (just ask your mutual fund manager).

I read a comment on a real estate discussion group on the Internet. In response to an inquiry as to whether a particular seminar or training program was worth the money, someone answered, "Why waste your money on that stuff? Just use your money as a down payment and learn as you go." This is probably the worst advice you could e...