If you want to buy property abroad, read these 10 common mistakes made when buying a house abroad by real estate investors to avoid making similar costly mistakes.
Bankrate.com has put together the top 10 mistakes after speaking to established, full-time real estate investors and other professionals involved in real estate investment such as bankers.
1. Not planning ahead
Lack of a proper plan is one of the biggest mistakes made when buying a house abroad by novice investors. Finding a house after forming a proper investment strategy is the right way instead of looking for a house to fit the plan. Many make the mistake of buying a house because it seems to be a good deal; only afterwards do some prospective buyers then try to see how they can fit it into their plan.
Instead of buying a house and thinking one can plan in due course, investors should concentrate on the numbers; try to make offers on multiple properties. This will ensure a good property that not only matches their investment model but also works out well with the numbers they had planned for.
2. Believing you can make money quickly
The second major mistake that real estate investors make is to think it is very easy to get rich in real estate. This is only a myth, however. The reality is that investing in real estate is a long-term project.
3. Doing it single-handedly
To become a successful real estate investor, one needs to build a team of professionals to assist in deals. This ideally includes a real estate agent, an appraiser, a home inspector, a closing attorney, and a lender.
4. Making excess payment
Investors in real estate often goof up in their investment by paying too much for the properties they buy. Paying too much and locking up all your funds in the erred property deal leaves you with no money to redeem yourself.
5. Leaving out the groundwork
Not doing your homework is a costly mistake for a real estate investor. Learn the fundamentals before venturing into investing in properties.
6. Throwing caution to the wind
Investors have to exercise a certain degree of caution and take earnest efforts while making a deal. New investors often fail in this regard, however, and sign a deal without doing adequate research on the property.
7. Miscalculating money flow
Investors whose strategy is to buy, hold, and rent out properties need to ensure sufficient cash flow for maintenance. Managing a property could be expensive and the owner is likely to incur more expenses such as mortgage, taxes, insurance, advertising costs; mismanaging money flow is one of the more common mistakes made when buying a house abroad. Investors have to allocate their budget and make sure all these expenses are taken care of, or end up having their asset turn into a liability.
8. Lowering the volume
A larger volume of deals or transactions helps in increasing the profits by reducing the impacts of marginal deals.
9. Trapping yourself in your own deal
Having a number of options at hand for the property you buy is a wise strategy. This helps one to be prepared for fluctuations in the real estate market. Plans to rent out the house could go awry when the rental market slumps. Having alternative plans helps you cut down losses and tackle unexpected situations.
10. Making incorrect estimates
People who plan to rehab their house need to make sure they will still reap the benefits at double the time that they had estimated. This ensures they do not miscalculate and lose money on the deal.