6 Things to Take Away from Bad Real Estate Investments

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For someone with cash, and is hoping to make a little more, investing in real estate is often one of the best decisions that you can make. After all, most properties only go up in value over time.

However, real estate isn’t foolproof, and just because you buy property doesn’t necessarily mean you’re going to always turn a big profit or have passive income for life. In fact, real estate investments can go bad rather quickly if you aren’t careful.

Learn from these lessons and save yourself some headaches and money in the process.
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1. Don’t Jump In Too Fast

Real estate deals sometimes present themselves in a hurry. Maybe there’s a foreclosure in your neighborhood, or maybe somebody told you about a commercial property that seems too good to be true.

Whatever it is, rushing into a deal is something many new investors do – only to find out later that they didn’t do as much research as perhaps they should have. A good deal can immediately become a big loss if you don’t get all of the facts before you buy.

2. Don’t Get In Over Your Head

The lure of making money in real estate investing is enough for many people to buy properties they can’t really afford if everything goes wrong. After all, they can always rent the property or sell it, right?

The answer is: no. If you can’t afford to hang onto a property for a few years in a changing economy, even if you don’t get any income from it, it’s likely that you can’t afford it at all.

3. Don’t Stray Too Far From Home

Unless you’re familiar with multiple locales – perhaps you have dual-citizenship or residences – you may want to put off buying real estate far away from your home for a while. The problems which may crop up when you don’t live near your property get messy, and if you’re not truly familiar with an area, an investment property can just be a blind risk.

Simply put, a property far away from your home probably isn’t a wise first investment property.

4. Don’t Invest Too Much

You can’t really invest too much money as long as you have it, but you can invest in too many properties. Even when it comes to real estate, the income won’t be totally passive.

There will be property maintenance, showings, and tenants to deal with if you choose to rent. Spreading yourself too thin by buying too many properties to keep track of and take care of just may result in you losing money – even if it seems like you can’t lose with so many investments.

5. Don’t Ride the Bubble

Sometimes buying property in an area that’s hot and just seems like it’s going to get hotter is wise – if you do your research and know exactly when to sell. In fact, it’s basically the principle of momentum investing that many people have used successfully in the stock market. However, for some investors, buying at high prices and assuming prices will become astronomical isn’t a good idea.

This is especially true of investors that won’t be watching the market every day or week, looking to make a fast, small profit. If the bubble bursts before you sell, you’ll be out a lot money in most cases.

Image Courtesy of ShutterStock.

6. Don’t Get Greedy

The real estate business is an ideal way to make money, but it isn’t going to necessarily make you rich overnight. Whether you’re seeking out too many properties to manage properly or simply taking risks that are too big, trying to earn too much too quick ends up easily backfiring on you.

Unless you have the money to lose, don’t gamble with it. Fewer, smarter investments will be better in the long run than multiple risky ones. It’s also essential that you manage your properties carefully. If you’re new to real estate investing, consider hiring a consultant with experience to help you out if you plan on buying more than one property.

Now it’s time to hear from you. Have you ever invested in real estate? What were your experiences, did you ever get a bad deal? How have you ensured you played safe all this while? How much profit have you been making from the investments you have made so far, and how do you intend to re-invest your profits?

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