First Rental Property

Hi Everyone,

I hope you are doing well.

Very often we hear about real estate investors who have become successful at investing.  We can read about these people everywhere, especially on the ‘Blogosphere’.  People like to write about their successes, and how well they are doing as investors.

However, we don’t often hear from the real estate investors that have failed, and who are no longer investing in real estate.

I have yet to come across a real estate blog written by a former swiss made rolex clones real estate investor, who has lost all of their money, and who are no longer investing in real estate.

The reality is that when people fail as real estate investors, they disappear into the night and we often never hear from them ever again.

This is unfortunate because these people have made mistakes that all of us can learn from.

As my blog has become a lot more popular over the past year, I have spoken to a number of people who have failed as real estate investors.  The truth is that there is not much of a difference between those that have failed and those that have succeeded.  For the most part, everyone starts off with great ambition, and with hopes of accumulating wealth through investing in real estate.  This is fine and dandy, but…

In only takes one mistake to fail.  Often it is this one mistake that wipes out the real estate investor altogether.

I will share with you one common mistake that is made by aspiring real estate investors.

This mistake relates to the purchase of new construction properties.  On a number of occasions, I have seen people make grave errors with this investing strategy.

Unlike many experienced real estate investors, I am a proponent of buying new construction.  If the numbers work, and you are buying in the right location, under the right market conditions (ie: transitional area)  you can really do well in terms of equity appreciation with new construction.

Despite all of the advantages of investing in new construction, I have witnessed people make huge errors with this this buying philosophy.

For example, In the Greater Toronto Area there were increasing numbers of people buying new construction from 2003 until about 2007.  The area was experiencing a rising market, and it was easy to look like a genius if you purchased new construction during these years.  It was not uncommon to realize  double and triple digit returns year over year, depending on the size of your down payment.  It was a great time as a real estate investor, and those that purchased during this time, realized substantial gains in property values.

This rising market made people believe that it was easy to make money investing in real estate, and as a result, people did not take the time to do their own personal research before buying.  They blindly jumped into buying new construction properties with that hopes that the property would rise in value and that they would profit.

I have been contacted by a number of people who bought new construction during the past several years and who have now found themselves in a position in which they are unable to obtain a mortgage for their new property.  Some of these people were able to able to obtain a mortgage at the ‘eleventh hour’, by bringing in mortgage partners,  however, many of these people ended up losing all of their deposit, and in some cases, even more than just their initial deposit.

I have seen people lose between $20,000 to $50,000 when they have attempted to purchase new construction properties and have not been able to close (obtain a mortgage) on the property.

When people are not able to close on the property, due to the fact that they are not able to be approved for a mortgage, they lose their deposit to the builder, and in many cases are sued by the builder for additional amounts.

There is one common mistake that these would be investors make, that results in the eventual loss of their money.  Their mistake is as follows:

They deposit money with a builder to buy a new property, yet they NEGLECT to determine if they are able to obtain a mortgage on the property, prior to making their deposit.

When the closing date for the property draws closer, they then try to obtain a mortgage by approaching their bank or mortgage broker.  This is often too little too late.

Had the individual first consulted their bank or mortgage broker, prior to depositing their money with the builder, they would know from the very beginning if they are able to afford purchasing the property or not.

It is a sad state of affairs, however, I have seen a number of people fall into this trap.  This truly is the dark side of real estate investing.  It is not pleasant to witness these people lose so much money.

What is even more troubling to me is that people think that they are invincible.  I have had a few occasions in which people have approached me and asked me questions about buying new construction.  I have spoken to them about the pros and the cons, and have advised them that BEFORE they do anything, they must first consult an experienced mortgage broker, so that the mortgage broker can advise them as to whether nový Mentolové příchuť Náplně or not they are able to afford the eventual mortgage on the new property.

I have given people this advice and on a handful of occasions they have not listened to me and gone ahead and purchased a new construction property, without even checking to see if they are able to afford the mortgage.

Having only been investing myself for under 6 years, I am not sure if this phenomenon of stupidity is a recent one, or if it has always been around.  I am wiling to bet that it has always been around, however, I would like to hear from those of you who are veteran real estate investors and who have insights to share on the new construction market.  Please share your comments.

In summary, there are a lot of people who lose large amounts of money trying to become real estate investors. We seldom hear about these people, and only seem to hear from those that are doing well and having a certain degree of success as a real estate investor.

It is very important to be aware, that with just one simple mistake (the mistake of not consulting a mortgage broker or bank) prior to purchasing a new construction property can very easily end a real estate investors career before it even begins.

If you make this type of mistake, you may dig a hole for yourself that may take you a lifetime to climb out of.

Continually educate yourself when it comes to real estate investing, and learn from the mistakes of people who have gone before you.

Best Regards,

Neil Uttamsingh.

PS: I can help you avoid the mistakes that many new real estate investors make.  Subscribe to my blog today.