New Real Estate Investors make a certain mistake over and over.  I have no idea why they keep on making this same mistake.  I can’t explain it.

What I can do is identify it, and offer recommendations as to how to avoid making it.

The mistake I see new investors make is:

Failing to get second opinions.

Let’s pretend that your car needs a tune up.

You take your car into your local auto body shop to get a quote on how much the work on your car is going to cost.

The manager of the auto shop quotes you a price.  You don’t know if the price is fair or not, given that you know nothing about cars.

What do you do?

Do you blindly accept the price?

Or do you seek out another quote before getting the work done?

I believe most people would answer by saying that they would get another quote.

I mean, after all, who would pay a price for something not knowing if that price was fair or not…right?

Well, dear real estate investors…

You will be surprised how often this happens in the real estate investing arena.  Specifically with new real estate investors.

Here are 3 Dumb Mistakes New Real Estate Investors Make

ONE

Picking the wrong neighbourhood

As a new real estate investor, you have to do your due dilligence in picking the right neighbourhood that you will invest in.  Being new to investing, you may know nothing about the neighbourhood that you are about to invest in.  If this is the case, you are probably learning from and taking the advice of a more experienced real estate investor or Realtor that knows that area well.

This is all fine and dandy but…

As a new real estate investor, you have to go one step further, and get a second opinion on the neighbourhood from someone else.  This second opinion can come from another Realtor or another experienced investor.  The opinion has to come from someone who knows that area well.

Why do you need a second opinion on the neighbourhood?

You need a second opinion because there may be something about the neighbourhood that the Realtor you are working with or the investor that is helping you does not know.

When I purchased one rental property, I bought it in a neighbourhood that I had heard from a number of people was a good place to buy.  Based on this information, I chose this neighbourhood as the place that I was going to buy.  When I found the particular property that I was going to buy, I bought that property, WITHOUT getting a second opinion from another Realtor or investor.

Little did I know that I bought the property a couple of streets over from a section of the neighbourhood that many investors avoided.  This smaller area, was avoided by a lot of investors because the tenant profile was a little bit rough and the properties were run down.

Fortunately, the property that I ended up purchasing was a good one, and I have had no problems with it thus far.

However, if I had done some more due dilliigence and asked for a second opinion of the neighbourhood, there is a chance that I would have passed on this property, knowing that the neighbouring streets had a rough tenants profile.

TWO

Paying the wrong price for a property

I have spoken to many real estate investors who have demonstrated great excitement when talking about buying their first rental property.

However, it is disturbing to hear how people are over paying for their properties.

Why is this happening?

I think it has a lot to do with the emotions that investors are feeling.  They are new to the game, and excited to get a deal done.  When they are in the moment, they don’t take the time to think if they are over paying or not….because they just want to own something.

When you are buying your first rental property, you need to take a step back and get a second opinion on the price that you are paying for the property.

You can get a second opinion on this by asking your Realtor to see comparable properties that sold, or you can ask an experienced investor that owns properties in that area how much properties are going for.

Further, you should never make your ultimate decision on how much you are going to pay for a property based on one person’s opinion. After all, they may not have your best interest at heart…

I have heard of cases where investors have purchased rental property using a Realtor, and without even looking at any comparable sales.

If you chose to buy properties like this, how do you know if you paid the right price???

You have just overpaid $20,000 for the property.

THREE

Overpaying for renovations

Once a real estate investor has purchased their first rental property, they may be overly excited to renovate the property.

A lot of the time real estate investors will buy properties that need some work done to them.  Perhaps the home needs some new flooring and a coat of paint.  Or maybe the home needs to have it’s furnace replaced, as the current one is a bit old. Or maybe all it needs is some new tiles in the bathroom.

Whatever the case is, new real estate investors are making mistakes when it comes to completing renovations on their first rental property.

A mistake that they are making is accepting whatever price is quoted to them by the first tradesperson they talk to.

For instance, if you need your floors and walls painted, you may get a quote of $6,000 dollars by a handyman that was referred to you.  Most new real estate investors accept that first quote that they get, and get the work completed based on that quote.

Very few investors, with their first property take the time to get multiple quotes from a number of handymen.

If you do this, you will be amazed at the range of pricing you will get…for the exact same work !!!

Here is a story that I will share with you, that hopefully drives home the importance of getting multiple quotes.

I was replacing the flooring in one of my renal properties.

I decided to deal with well known companies to get the job done.

I got a quote from a company who had multiple store locations in the same city.  I got a quote from one of the stores, however, I felt that the store manager that I was dealing with wasn’t telling me the truth about everything.  I just got a funny feeling from him.

As such, I decided to go to another store location of the Company in the same city.  I got a quote from this location that was 50% cheaper than the quote from the other store.  Which resulted in over $1000 of savings.

Nothing had changed regarding the quote…just the people, and store locations I was dealing with.

Had I just blindly gone with the first quote that I got, I would have been cheated.

Don’t make dumb mistakes.  Get second opinions on everything!

Best Regards,

Neil Uttamsingh

ps: Let other people make dumb mistakes, not you!  Be Smart and Subscribe to First Rental Property today!

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