Real estate is one of the most competitive markets that there is and with good reason. Traditionally speaking, real estate is one of the soundest investments that anyone can make. But deals fall through all the time due to common mistakes.
Here are 7 of the most common mistakes that can be avoided so that your next real estate deal doesn’t fall through.
- Bad Planning
Planning is everything. There are about 2-4 weeks between an offer being accepted and money being put down. Schedules, budgets, and scopes of work should all be in place by this point.
- Add-Ons
With everything scheduled, making add-ons is a bad idea. It means adding costs and prolonging the timeline when none of that would have been necessary from the outset.
- Under Budgeting Repairs
Without a doubt one of the biggest mistakes made. Know what your contractor expects and what should be budgeted towards making those necessary repairs.
- Financing Costs
It is all too easy to look at financing and omit things like paying points, covering interest costs, or paying for appraisals. What may have started with a $20,000 investment is more like $30,000 because costs aren’t factored in.
- Missing the ARV
After Repair Value (ARV) is crucial for any property. Know what separates the property apart from others in the area and determine where that fits with rental incomes.
- Holding Costs
Yet another area where costs can cut into profits. New investors often fail to keep insurance, property taxes, insurance, and the other expenses in mind when it comes to their bottom line. And that can eat a huge chunk out before you know it.
- Material Markups
Finding a contractor who can estimate the cost of materials is crucial. One of the ways to kill a deal is to assume materials cost x when they are really x+. For new investors, it may mean working with a few contractors first before finding one you are comfortable with.