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Top 5 Income Property Investing Errors that Newbies Make

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If you are new to the wonderful world of rental property investing, you will find that there are plenty of landmines that can conspire to undermine your efforts.  As such, I thought it might be helpful to summarize these common mistakes in the hopes that you do not repeat them as you embark upon your income property investing career.

  1. Failure to document your long term investment strategy and plan.  Figure out your financial objective, and how many properties you will need to acquire to achieve that goal.  The simple act of writing down your plan and strategy will help motivate you to take action.
  2. Failure to understand that you cannot have 100% information transparency.  There is no way to cover all your bases when evaluating a property for purchase.  Do not get bogged down trying to do your due diligence to the ‘Nth’ degree.  Instead, focus on the 80/20 rule; that is, 80% of what you need to know will come from only 20% of your effort.
  3. Failure to make risk management a priority.  Like any investment activity, real estate has its share of risks.  By underestimating or ignoring these risks, sooner or later you’ll be in for a rude awakening.
  4. Allowing your emotions to trump the numbers.  Always remember that you are not buying a personal residence, you are buying a property to rent out to others.  As such, the only thing that matters is the numbers.  Never fall in love with any property.  In fact, the ugly properties and fixer uppers usually make the best investments.
  5. Trying to do everything yourself.  Realize that you cannot make 100% of the repairs yourself, try to buy or sell without a rental property agent, etc.  Know what you do well and what you don’t, and use that information to outsource tasks that are more appropriate for professionals.  You need an agent, a network of contractors, an accountant, and other key helpers on your team.  Trying to do everything usually means that nothing gets done.

There you go, I hope all you newbies out there will study this list and avoid making the common mistakes that could derail your business before it ever gets off the ground.

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