5 Mistakes in Real Estate Investing

by Anne Lackey

As a real estate investor, you likely have visions of a life filled with easy income and plenty of free time for travel and leisure. Although real estate investing can certainly bring you wealth and a lifestyle most people only dream of, you need to be aware of common mistakes made by new investors. Being aware of these errors can help you avoid them, and build a profitable investing business that will support the lifestyle you desire.

The single biggest mistake made by new real estate investors is lack of planning. Many new investors fail to develop a long term strategy, instead choosing to plan as they go along. Without a clearly defined set of goals and a detailed plan for achieving them, you will likely make investment decisions that are not optimal for long term profitability. The properties you choose for purchase should fit your investment strategy, not the other way around.

The second mistake make by many investors is failing to properly account for cash flow. While you are the owner of an investment property, you are responsible for not only the mortgage payment, but also the property taxes, insurance, maintenance, association dues, and other expenses that come with owning that home or apartment building. If you find that your rental income is not covering your expenses, you may find it difficult to raise your rent without losing tenants. If you are renovating a home for resale, the property may sit on the market for several months before you locate a qualified buyer. Make sure that you have adequate cash flow to cover expenses during this period.

A third common mistake new real estate investors make is planning for only one exit strategy. If you buy a property with the intention of renovating and selling it, you will need to develop another exit plan if the house doesn’t sell. You could rent the house out until market conditions improve, or offer a buyer a lease-purchase option. Your back up strategies might be less than ideal, but they can keep you from losing money on your investments.

The fourth common mistake is thinking that real estate investing is a ticket to fast wealth. Unless you realize from the beginning that investing takes hard work, patience, and a long term plan, you are likely to become discouraged and give up before you start seeing the kinds of profits that will allow you to live a life of freedom.

Finally, the fifth mistake made by many new investors is deciding you can handle all of the aspects of investing yourself. It’s impossible to be an expert at every facet of real estate investing, so a smart investor will develop a “team” of professionals, such as an attorney, an accountant, property manager, a real estate agent, and several remodeling and maintenance professionals. This will ensure that all aspects of your business are handled correctly, and free up your time so you can continue to develop your real estate empire and long term wealth.

If you are interested in getting started in real estate investing and are interested in Georgia properties, we would appreciate the opportunity to serve you. Find out more about us at http://www.AtlantaHousingSource.com.

About the Author

Anne knows Atlanta and the Gwinnett County real estate market. She works with first time buyers and families wanting to move up to a larger home or down size. She has helped hundreds of people with their housing solutions. For more information go to http://www.AtlantaHousingSource.com

ProAPOD Releases Canadian-version Real Estate Investment Software

Although ProAPOD has been a leading real estate investment software provider to real estate agents and investors since 2000, it has not had (until now) a “Canadian-friendly” version of its software. ProAPOD 6.0 has just been updated and now includes “semi-annual” compounding (the compounding period used to calculate loan payments in Canada).

The main difference between a US and Canadian mortgage is the compound period. Whereas the compound period for US mortgages are monthly, Canadian mortgages are semi-annual. This difference results in a slightly lower monthly mortgage payment for Canadians.

Take for example, a loan amount of $100,000 at 7.00% interest rate amortized over 25 years. The monthly mortgage payment is $706.78 when compounded monthly (as in US mortgages), and $700.42 when compounded semi-annually (as in Canadian mortgages).

How it Works in the Software

After the user opens the V.6.0 real estate investment software, he or she simply opens the loan form and under the heading Type of Compounding, selects either “Monthly (USA)” or “Semi-annually (Canada)“. ProAPOD does the rest. All the monthly and annual mortgage payment calculations used throughout the real estate analysis from that point forward reflects the compounding period selected by the user.

About ProAPOD 6.0

This is our real estate investment software solution for residential agents looking to service multifamily property occasionally, as secondary part of their business, with less effort devoted to commercial real estate. This flagship solution provides everything agents require to make rock-solid buyer and seller presentations, including a wide range of essential calculations, crucial rates of return, printable reports, and outstanding time-saving features, but without the consideration for the elements of tax shelter.

At just $149.95, it is the ideal software for real estate agents-both in the US and in Canada-who want to make rock-solid buyer and seller presentations but do not plan to service more than two or three investment real estate transactions a year.

6 Reasons Why Investors Use Real Estate Investment Software

In this article we’ll consider why serious real estate investors—those who want to make the best return possible on their real estate investments—use real estate investment software to evaluate investment opportunities.

  1. It’s fast. Good real estate investment software makes it possible to analyze cash flows, rates of return, and profitability of rental properties in minutes. This enables investors to collect the data needed for decision-making quickly.
  2. It’s precise. Good real estate software makes accurate calculations for a wide-range of returns and measures deemed crucial to sound real estate analysis. The last thing analysts should have to worry about is faulty math.
  3. The reports are informative. Good real estate investment software creates professional-quality reports investors can confidently pass on to colleagues, partners, and lenders.
  4. It knows what data is required. Good real estate software includes forms specially designed to gather the appropriate facts and figures about a property. This is particularly helpful to investors with little or no real estate analysis experience because they just fill in the forms and print.
  5. It keeps the seller’s data honest. Investors who have the ability to run the numbers themselves prevent anyone from making an unrealistic presentation of the property and perhaps “slipping one” by.
  6. It’s inexpensive. Good real estate investment software does not have to cost an arm and a leg. Anyone can create top-notch real estate analysis presentations forever for just a few hundred dollars.

Okay, now let’s consider the alternative.

  1. You can create your own spreadsheet. Excel makes it possible for anyone to mimic most real estate investing software solutions. But it takes time (lots of time) to develop the reports and calculations provided in good real estate investment software. You should ask yourself whether you are inept enough about real estate investing and Excel before you get started. Plus, remember that your goal is make a profit on real estate investment and not to shave a few bucks off your analysis presentations.
  2. You can rely on rules of thumb. It’s easy to calculate a property’s cap rate or gross rent multiplier. But what about cash-on-cash return, cash flow after tax, internal rate of return, and mortgage amortization? Bear in mind that you are planning to make a huge real estate investment, so you should rely on something more meaningful than on simple calculations you can do in your head.
  3. You can accept the seller’s data. But it’s never a good idea to accept property data point blank because it leaves too much room for others to embellish reality. You should always be prepared to verify the numbers you are presented about any investment opportunity to be sure that they comply with your real estate investing plan.

You get the idea.

The important thing is to realize that real estate investing is a business and real estate investment software is a tool that will help you to grow that business wisely. And in the same way that serious real estate investors have come to rely on good real estate investment software to help them make smart real estate investment decisions, so should you.