1.) Paying Too Much
There is a lot of emphasis around the real estate investing world on getting incredible deals for wholesalers and flippers – and rightly so. These kind of investors need to get amazing deals in order to make a quick profit. However, just because you plan to hold on to property for the long haul – doesn't mean you can afford to pay too much. Yes – over time, that mortgage will be paid down to zero but that doesn't give you an excuse to pay more than you should.
2.) Adjustable Rate Mortgages
An Adjustable Rate Mortgage (ARM) is a loan, but unlike a “fixed rate mortgage” – the interest rate can change with the economy, causing your payment to skyrocket. I understand the allure of an adjustable rate mortgage: low payments at the start. However, although you might lock in that rate for 3 or 5 years… there is no guarantee what the economy will be like in 3-5 years. For me – I want to have the most control over my destiny, and ARMs take a huge chunk of my control and put it into the hands of the US economy.
3.) Not Learning the Landlord Business
Land-lording is a business, and like any business – the success of that business depends almost entirely on the owner’s ability to lead. Many treat land-lording like a hobby, insisting on handshake agreements, loose rules, and emotional decisions.
4.) Not Doing the Math
Take all expenses into account then ad 5%!
5.) Not Buying with Property Management In Mind
Make sure to calculate PM with this in mind!
6.) Quitting Your Job
Investing is Investing! Never rely on it for your total support. Investing is used to build net worth! You job is what allows you to live & invest!