About Me

Understanding Real Estate

Welcome to my blog! My name is Doreen and I am here to provide all of the information you need to fully understand real estate. When I bought my first home about 7 years ago, I didn't have a clue what I was doing. I found the entire process very confusing. However, all of that changed when I decided to sell my house a few years later. I found a fantastic real estate agent who taught me everything I needed to know. Since that time, I have bought and sold several other properties. I hope you like this blog and that it helps you to secure the home of your dreams.


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Understanding Real Estate

Rental Property: Avoiding Common Mistakes When Investing in Real Estate

by Minnie Simmmons

A rental unit can be a profitable long-term investment. In general, this type of property will provide profit for a prolonged period, ensuring a steady flow of income. However, if you are a beginner in the industry, there are numerous issues that you must evaluate before purchasing rental units. Often, people invest rashly in this sector and end up overwhelmed by the responsibilities of handling their new investment. Moreover, there are some obstacles which new investors experience, causing unexpected losses and frustrations. Therefore, if you are unfamiliar with the rental property sector, consider this outline of the common mistakes you should avoid when investing.

Choosing the Wrong Property

When purchasing a rental property, it is essential for you to select the right match. The wrong selection will cause unexpected losses, and you might not get enough tenants. In general, you should ensure that the property is optimally located in an area which is favoured by your target market. If you choose a cheap unit in an area without direct access or essential amenities, you will experience difficulties getting tenants. You should also not purchase an inexpensive house in need of fixing. Rundown properties can be expensive to restore, so you will find it difficult to offset your losses.

Poor Calculation of Loan Interests

You should compare the loan interests imposed your mortgage lender. Often, new investors assume that the interest rates for rental properties are the same as for residential units. As a result, the calculated long-term expenses are inaccurate. It is essential to consult different lenders before choosing your ideal loan. When selecting the right mortgage, you should ensure that the required monthly payments will not eat into your profits. In simple terms, the total mortgage payments and your operating expenses should not exceed your expected monthly returns.

Inaccurate Calculation of Returns

Finally, you should be diligent when calculating your returns from your rental property. Often, new landlords assume the best when calculating the potential profits and end up with inaccurate figures. For example, most investors will consider returns under the impression that the unit will always be occupied after purchase. Moreover, they do not account for accidents which might require financial resolution. If you would like to ensure adequate preparation for mishaps and avoid unexpected losses, you should be conservative in your calculation of returns.

The process of choosing and purchasing rental units can be challenging. Therefore, you should consult a real estate expert in your local area for professional guidance on selecting, buying and managing your new investment.