Sunday, March 1, 2009

Beware - Three Investor Mistakes To Avoid When Buying Houses

We all know that real estate is one of the best places to invest your money. No matter if your investing strategy is for capital gains or cash flow, real estate is the vehicle that can provide both. The nicest thing about investing in real estate is that a lender will give you money to buy property. Just ask your stockbroker how much she’ll lend you to by $200K worth of stock!

We buy houses at Roberts Investment Properties LLC, and we want to help you avoid some of the common mistakes that investors make. Unfortunately, every real estate investor out there has made investing mistakes in the past and some continue to make those same mistakes today. It’s just a part of learning (that’s life). The key is to minimize your mistakes, and more importantly learn from them. This short excerpt will illustrate three of the most common mistakes to avoid when buying houses.

number one mistake to avoid is buying houses at the wrong price. Most people think of real estate as a speculation game. By this I mean they are buying at a certain price now because the market may be hot. These buyers are anticipating housing prices to appreciate rapidly. Although this method does work, it is very short sighted. This strategy is all about timing, and if you’re late then you’re in trouble. We’ve all witnessed markets that went up fast eventually came down almost as fast. The bottom line is that your profits are NOT made when the house is sold; however, profits ARE made on the front end (when you buy it right).

number two mistake to avoid is NOT having a buyers list. This is not just a beginner mistake. Even those that have been buying houses for sometime have made the mistake of not having a buyers list. Some of you maybe asking, “what is a buyers list?” The answer is as simple as it sounds. A buyers list is a predetermined network of people that are willing to buy property from you. These buyers may be wholesale buyers or retail buyers. Wholesale buyers are those that want to buy houses in “as-is” condition. They do not care to do any work that is needed to be done to they property. Their goal is often times to sell the house to a retail buyer. It is this retail buyer that is the ultimate end buyer of the property. They buy houses in “move-in-ready” condition. As you may already know, the majority of properties on the MLS are for retail buyers.

number three mistake to avoid is NOT having an exit strategy prior to purchasing a house. An exit strategy is a predetermined selling strategy that the investor uses before purchasing a property. For instance, a landlord has predetermined that before buying a 4-unit house she will sell it in 30 years. In this example, the exit strategy is to sell the house in the future after the tenants have paid for it. Another example of a predetermined exit strategy is for an investor to buy a single family house at a discounted price. Since the property is purchased at a discount, it can then be wholesaled to another investor who wants to rehab it for more profit. In this example, the original buyer bought it right (avoided the #1 mistake). The exit strategy is to wholesale the house to another investor (avoided the #2 mistake by using her buyers list).

By avoiding these common mistakes, your chances of success are significantly higher. Does this guarantee that you will not make other mistakes? Of course not, but avoiding these three mistakes can save you a tremendous amount of time and money. At Roberts Investment Properties LLC, we have used these same strategies to buy houses in Knoxville, TN. They can also work for you in your area of the country. One of our goals at Roberts Investment Properties LLC is to help investors succeed and pass along the success secrets of buying houses.

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