Over and over again, I see real estate investors who are looking for cash flow make the same mistakes! Bar none the first mistake most investors’ make is they do not have a strategy or plan for their investments. What is the criteria you will establish for your real estate investments. For example if your first priority is looking for cash flow you need to find an area that can best fulfill your goals of cash flow.
Real Estate Investing Mistakes To Watch Out For
Ignoring the property taxes: People feel that this is an expense they have to live with so they suck it up and pay it. The problem with this is that every dollar you spend on taxes is a dollar that comes out of your cash flow, Gone forever, never to be seen again. (OUCH)
When evaluating areas to invest in this should be one of your first pieces of diligence as it is a large fixed expense that will be a drain on your cash flow forever. Do your diligence, many times as you go from county to county or city to city taxes will change drastically and this may have a great impact on your Return on investment (ROI).
Ignoring Insurance rates: same as above. What is happening in the city you are about to invest in? The insurance industry sets its prices based on an actuary approach. in other words what is the probability of a property owner making a claim. Areas that are by the water may have a high probability of floods, therefore raising the insurance claims and the insurance rates. Areas within high wind areas may experience the same toward wind claims. When identifying best places for cash flow these need to be established.
Ignoring Tenants: Happy tenants are paying tenants! When a tenant is happy they stay longer which goes to increase your bottom line. I always “at lease renewal time” offer an incentive to renew such as a handyman for the day or the afternoon. This shows them you care about them and about keeping your property in good shape. Maybe giving them a fresh coat of paint in the bedroom or a new set of shelves in the bathroom is all it takes to let them know you care and to keep them paying rent. Your property stays in better shape and it is a lot cheaper to renew a tenant with a slight increase to the rent than to lose a tenant and go through the expensive task of re-leasing.
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