First-Time Investment Property Owner Mistakes to Stop Making Now

If you are like many property owners, you probably share the belief that taking the leap, and making that first investment can be one of the scariest, most overwhelming times of your career as an investment property owner.

And, while there is plenty of information out there guiding first-time property owners in the right direction when it comes to financing property, what to look for in quality investments, and how to manage a rental successfully, the truth remains:

Learning from other people’s mistakes is often the best way to climb the real estate ladder and become a successful property owner.

That said, today we are going to look at a slew of mistakes you need to stop making now as a first-time residential property investor, so that you don’t join the ranks of property owners that never make a viable living off of their rental properties.

Top Mistakes First-Time Investment Property Owners Make

1. Placing Emotion Above Logic

Owning rental property is just like operating any other business. You need to make sound, analytical decisions when it comes to purchasing your first property to avoid overpaying for an overvalued property that will not yield the financial results you are looking for.

Keep your emotions out of any purchasing decisions you make.

2. Lack of Research

Most people would not walk into a car dealership, pick a car off the lot, and simply buy it outright because they think it will be a good car.

Well, purchasing a rental property should be no different.

Make sure you thoroughly research the market, location, going rates for similar rentals, and condition of a rental property before purchasing to avoid buyer’s remorse.

Make sure your first-time rental property purchase is a good investment that will yield positive cash flow far into the future.

3. Banking on Appreciation

Sure, appreciation is ideal in the rental property business.

And, if your property gains a great deal of value over the years, thus yielding higher rent amounts or an amazing sale price, great!

However, purchasing solely because you are banking on the value of your property going up over time is a huge mistake.

If it doesn’t make sense to invest in the property at the time of purchase, you probably shouldn’t go through with the purchase.

4. Overpaying for a Property

When you are close to finalizing your first-time investment purchase, it can be an exciting time.

However, be careful not to let this excitement get in the way of the reality that you are making a large purchase that is going to affect you for a long time.

Overpaying on the “perfect” property is a bad idea. It invites a lot of debt, frustration, and stress into your life. Plus, it will take a long time to recoup your losses, regardless of how you lease the property.

Don’t jump in and buy the first “perfect” property you find; there are plenty of perfect properties out there to suit your needs, and your budget.

5. Having Too Much Prior Debt

Getting into the rental property business early on will help you gain financial freedom quicker than ever.

To add to that, experienced property investors are likely to have a significant amount of debt that they use as leverage to purchase more properties, and expand their portfolios.

However, as a first-time investor it is not wise to jump into the rental property business with lots of excess debt.

This not only harms your chances of getting solid financing terms (if you are approved at all), but it also puts you in a sticky situation should your property become vacant for an extended period of time.

After all, you are ultimately responsible for the mortgage, whether you have tenants or not.

Pay down as much debt as possible before purchasing your first-time investment property.

6. Trying to Self-Manage Your Property

Self-management of rental properties certainly is not inherently wrong. And, we don’t consider all self-managed properties to be a first-time property owner mistake. There are property investors that have experience in the real estate industry, and know what they are doing.

However, for those that do not know the first thing about managing a rental property, it is a mistake not to invest a little bit of your monthly income into a high quality management team to handle all of the tasks you may not even be aware need managing.

Hire a property manager to help with administrative tasks and tenant issues if you are unsure about what to do.

Other First-Time Investment Mistakes

There is a lot to learn from those that have invested in rental property before you.

Take a look at some of the other mistakes to avoid when purchasing your first investment property:

• Not having enough money for a down payment
• Failing to research interest rates on investment property purchases
• Miscalculating estimated rates of return against mortgage, maintenance, insurance, taxes, and other miscellaneous rental property costs
• Underestimating the cost to fix a fixer-upper
• Not brushing up on federal, state, and local landlord-tenant laws
• Paying for upgrades or improvements that don’t add value to the property
• Going the cheap route when it comes to initial repairs
• Not thinking long-term

In the end, purchasing your first investment property in Philadelphia, PA can be daunting if you are unprepared.

Unfortunately, there is such a wealth of information out there convincing you that no matter what, you too can be successful at owning and leasing rental property, with very little effort, cash, or planning.

In order to make it in the rental property business you have to have exactly the opposite – effort to put in, cash to hand out, and a long-term plan for reaching your goals.

Do yourself a favor and learn from others. The mistakes they made when starting out in the rental property industry can prove very useful to your success.