Everyone is prone to making rookie mistakes – even investors. CREW Online chatted with seasoned vet Randy Bett of Better Real Estate Group to find out the top mistakes first-timers make on their first properties.
1. Chasing cash flow. Many first-timers are keen on the idea of quick cash flow, but that isn’t tantamount to long-term financial success. Instead of aiming for a quick buck, Bett says, focus on winning low tenant turnover; the mortgage is still paid, the property is still earning appreciation and there are certain tax advantages.
2. Fearing the unknown. “Many first-time buyers wait too long start and tend to over-analyze the property,” says Bett. “The market in good areas is pretty hot, and properties will sell relatively quickly in Toronto, Calgary and Vancouver.” Bett has seen many investors doing due diligence on a property before they even have it under contract – a mistake that could cost them the sale.
3. Going it alone. While many first-time investors may find “The Lone Ranger” style of investing appealing, Bett cautions against cutting corners to save money, as successful investing requires many helping hands. He advises reaching out to a mortgage broker, an investment Realtor, a good insurance broker, an accountant with experience in real estate, a contractor, a property manager and a real estate lawyer. Phew!
4. Flying without a flight plan. Everyone’s real estate investing needs are different. “Create a plan that revolves around what you want, not what your contemporaries are doing,” cautions Bett. “You shouldn’t feel pressure to purchase more than you need.”
5. Winging it. Sinking between $250,000 and $500,000 into a property without an education in investment isn’t necessarily a wise move. Bett advises investing in yourself before your first property: do your research, take a course or attend an investor forum to learn about the business.
6. Nailing shut your exit. Diving into a property with no exit strategy spells trouble, says Bett. “Whether you fix it or flip it, have an exit strategy. Ask yourself before you buy, if I had to hold this property for 20 years, would I want to? Your answer should be a deciding factor in the purchase.”
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