10 Biggest Mistakes of Novice Real Estate Investors

I like to use Sundays to post other perspectives and "how tos" on Investing. Today’s involves a slight twist: Its on Real Estate investing.

Pat Curry observes that "Real estate has become the tech stocks of the 2000s, the darling investment that everyone seems to think will be their ticket to easy wealth." He put together a terrific list of things that novices RE investors best be aware of. Here’s an excerpt, but you should see the list in its entirety:

"If you’re looking for rental income — and most investors are, according to the NAR — buying a single-family house may be their first mistake. All it takes is for a property to sit vacant for a couple of months — or a tenant to run out on the lease — to put a new real estate investor in a financial bind. Far better to buy multifamily units, such as duplexes.

That way, you can live on one side and have the rent from the other side pay your mortgage. Or, rent out both sides and give yourself some breathing room in case one tenant moves in the middle of the night without paying his rent."

Here is Pat’s are 10 common mistakes made by new real estate investors; Many of these will look all too familiar to equity investors:

1. Falling in love with the property.

2. Not performing your due diligence.

3. Forgetting the rule of home improvements.

4. Thinking you’ll get those low mortgage rates you see on TV.

5. Not pre-screening tenants.

6. Breaking your own rules.

7. Investing long-distance.

8. Paying too much for the property.

9. Not studying the competition.

10. Being underinsured.


10 biggest mistakes of novice investors
Pat Curry
Bankrate.com, Thursday August 4, 6:00 am ET

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  1. Larry commented on Aug 7

    Real estate is not paper stock. It exists. It has value. It won’t go chapter 11, ie drop to zero like WorldCom or Enron. Real estate is not a perfect market. There is one price for Walmart shares everywhere. The identical house in California will fetch a different price in Phoenix.
    Real estate is also “improvable” – you can fix it, you can change it, you can market it reatively. You can’t so any of that with shares. They exist electronically.
    Real estate exists physically. Property delivers benefits – a nice lifestyle. There are no lifestyle benefits in shares. They do nothing for you. Harry Newton
    Message here: THEY ARE DIFFERENT ASSET CLASSES AND COMPARING (Internet) STOCKS TO REAL ESTATE IS SILLY. Real estate goes through 7 year (normal/healthy) cycles and stocks do not. You probably need to manage them differently.

  2. Mike commented on Aug 7

    You are right Larry, real estate is not stocks. Unfortunately, today’s newbie real estate speculators are buying into real estate as if it were stocks. This has benefitted real estate on the upside of the boom and it will hurt it on the downside.

  3. Rain City Real Estate Guide commented on Aug 7

    Get emotional about the deal, not the house

    Barry Ritholtz offered up 10 common mistakes made by real estate investors based on an article by Bankrate’s Pat Curry. The mistakes pat identifies stem from the idea that “real estate has become the tech stocks of the 2000s, the darling investment th…

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