Failing to do proper research

One of the biggest mistakes investors make when dealing with sellers is failing to do proper research. This can include researching the local real estate market, comparable properties, and the seller’s motivations for selling. Without this information, it’s difficult to negotiate effectively and make an informed decision about whether to invest in a property.

To avoid this mistake, investors should always do their due diligence before approaching a seller. This can involve researching local real estate listings, speaking with local real estate agents, and reviewing public records to get a better understanding of the property’s history.

Overestimating the value of the property

Another common mistake investors make is overestimating the value of the property. This can happen if the investor fails to do proper research or if they become emotionally attached to the property. Overestimating the value of the property can lead to overpaying, which can hurt the investor’s bottom line.

Conducting a thorough analysis of the property’s value before making an offer can help you avoid this. This can include reviewing comparable properties, assessing the condition of the property, and taking into account any necessary repairs or renovations.

Failing to negotiate effectively

Negotiation is a critical part of any real estate transaction, but many investors fail to negotiate effectively with sellers. This can be due to a lack of confidence or experience, or simply because they don’t want to risk losing the deal.

You should prepare for negotiations by setting clear goals and developing a solid strategy. Be willing to walk away if the seller is not willing to meet your terms.

Ignoring the seller's motivations

Understanding the seller’s motivations for selling can be critical to negotiating a successful deal. Many investors make the mistake of ignoring the seller’s motivations and focusing solely on the property itself.

When possible, and only if the seller is willing, take the time to understand the seller’s motivations for selling. This can involve speaking with the seller directly or working with a real estate agent who has experience dealing with the seller.

Not building a relationship with the seller

Finally, many investors fail to build a relationship with the seller. Building a relationship can help to establish trust and make negotiations smoother and more productive.

Avoid this mistake by taking the time to get to know the seller and build a rapport with them. This can involve being personable and friendly, listening to the seller’s concerns, and showing a genuine interest in their situation. Keep in mind that some sellers might not want to build a relationship and they are not obligated to do so.

 

By doing proper research, assessing the property’s value, negotiating effectively, understanding the seller’s motivations, and building a relationship with the seller, investors can make smart, informed decisions and build a successful real estate portfolio.

 

Cash Investments

When you invest with cash, you’re using your own money to purchase the property outright, without taking out a loan. Here are some of the advantages and disadvantages of this approach:

Advantages:

No debt: With cash investments, you don’t have to worry about making mortgage payments or accruing interest over time, which can save you a considerable amount of money in the long run. 

Greater flexibility: Since you own the property outright, you have more control over how you use it and when you sell it. Also, you won’t have to worry about waiting for a loan approval or dealing with the complications that can come with financing.

Less risk: Without a mortgage, there’s no risk of defaulting on a loan or facing foreclosure.

Disadvantages:

Lower returns: Since you’re not leveraging your investment with debt, your returns may be lower compared to a credit investment.

Opportunity cost: If you tie up your cash in a property, you may miss out on other investment opportunities that arise.

Less diversification: With all your money invested in one property, you may be exposed to greater risk if the property doesn’t perform as well as expected.

 

Credit Investments

When you invest with credit, you’re taking out a loan to purchase the property, using the property itself as collateral. By financing the property, you can keep your cash available for other investments or emergency situations. 

Advantages:

Higher returns: By leveraging your investment with debt, you can potentially earn higher returns than with a cash investment.

More options: With a mortgage, you can invest in more properties than you could with just your own cash.

Tax benefits: You may be able to deduct mortgage interest from your taxes, which can help offset your overall tax liability.

Disadvantages:

More debt: With a mortgage, you’re taking on debt that you’ll need to repay over time which can cause 

Higher risk: If the property doesn’t perform as expected, you may struggle to make mortgage payments or even face foreclosure.

Less flexibility: With a mortgage, you’ll need to follow the lender’s rules and regulations, which may limit your ability to make certain changes to the property or sell it on your own terms.

Which is Best for You?

When it comes to choosing between cash and credit investments, there’s no one-size-fits-all answer. It really depends on your individual financial situation and investment goals. If you have plenty of cash on hand and are looking for a low-risk investment with greater flexibility, cash may be the way to go. On the other hand, if you’re looking for higher returns and more investment options, credit may be the better choice.

At the end of the day, the key is to weigh the pros and cons of each approach and consult with a financial advisor before making any investment decisions. With the right guidance and planning, you can make a good decision that aligns with your financial goals and helps you maximize your returns over time.

When in doubt, you can also rely on our experienced realtors who can help you figure out which is the best way to go!

 

Waiving a home inspection

A home inspection may seem like an extra cost you can easily forego, but don’t let yourself be swayed! A home inspection can help you see if the property is in good condition or if it will cause any trouble in the long run. It also allows you to be protected in case anything does go wrong.

Spending all your savings

You have to make sure you are making the math right to leave enough money to be able to pay all the “little” things you have to pay for before closing on the property. Spending all your savings just in the property itself can cause many problems and could cause imbalance to your finances.

Don’t forget to check this article to make sure you factor in every cost.

Making emotional decisions

As a Real Estate investor, you have to be able to keep your head cold, evaluate all the possibilities and make the best decision. Don’t let yourself fall in love with a property and buy it without much thought. The key to being a successful investor is to chose wisely to determine each and every step you want to take.

Not making the right down payment

The down payment you make will make a big difference on your investment. It determines your interest rate and the monthly mortgage payment you will need to pay. 

You need to take everything into consideration, you don’t necessarily have to make a huge down payment if you can’t afford it, but you do need to think everything through and do the math carefully to choose an amount that is right for you and your future goals. 

If you are ever feeling lost, you can reach out to us and we will happily guide you through this process!

Poor communication

Communication at every step of the way is so important to achieve a successful outcome, even more so in this fast paced industry, communication can be the difference between winning or losing a deal. 

Good communication should be quick and should help you clear out all the questions you have.

Doesn’t ask about your plans

You want a real estate agent who will not only help you with one property, but who will be able to take you all the way to the top, and this will only happen if they are aware of your future plans and make sure the property you are looking at fits well with your business strategy.

Lack of knowledge on the area

As you may have heard, location is really important for real estate investors. A great agent will have knowledge of the area you are looking to buy in. Information like school districts, crime rates and public transportation is key to knowing whether the property you want is truly what you need.

Really low commission

This is a weird one, but it is usually true. A normal commission is between 5% – 7% of the property’s sale price, so anything below that might be sketchy. Though it may be attractive to hire someone due to their low commission, you should look into why the agent is taking so little money for their work.

Doesn’t connect with you

You don’t have to love your real estate agent, but if you don’t mesh well with them, it can be hard to navigate a deal. Trust your gut and don’t hesitate to change agents if you feel the one you are working with just doesn’t get you.

 

Don’t forget that the Frontline family has great agents that can gladly help you out! 

 

What is the TDEM?

The TDEM is an agency that coordinates the emergency management program of the State. It ensures that the State and the local governments are able to respond and recover from the damage caused by emergencies and disasters. It also launches and implements programs of public awareness about threats and hazards, provides specialized training to first responders and local officers, administers disaster recovery and hazard mitigation programs, and creates plans to help prevent or lessen the effect of disasters all around Texas. 

Why is it important?

Since it was established in 2019, the TDEM’s mission has been to provide a comprehensive emergency management program that includes pre and post-disaster mitigation, emergency planning and training, provisions for effective response to emergencies, and recovery programs to major disasters for the State and for assisting cities, counties and State agencies.

How can I get help?

Texans are encouraged to report any damage caused by a disaster or emergency. To do so and see if you qualify for any type of aid, you can self-file a survey here.

If you want to know more about them and/or ask any pertinent questions, you can click here.

*Remember that, even though the help provided can get you started on your recovery process, it will most likely not get you back to pre-disaster conditions.

Find a passion

Think of a cause you are passionate about and search for organizations near you that support it and what actions they are taking to do so. Don’t worry if you don’t have a lot of information, or are unsure on what you can do to make a difference. Reach out to them, they will surely point you in the right direction. Focusing on 1 or 2 causes will help you be able to really focus and do things to make the world a better place.

Hold an event

Try holding a fundraiser, walk or other like-event to make your community involved. Nothing drives neighbors more together than working towards a common goal.

With the cold weather coming in, an idea of what you could start with is to organize a drive to collect warm clothes, blankets and/or food for homeless and less fortunate people.

Not that this needs more selling, but posting things like this on social media can also give you exposure and can be a great way to network, so it is a win-win!

Get your family involved

If possible, make the whole thing a family affair, from choosing the cause to seeing it through. It can be a bonding activity with your partner and your kids will grow up looking for ways they can change and improve the world around them.

Perform random acts of kindness

Don’t feel bad if you are unable to do a big action to help your cause. It all starts with small things, so you can make it a point to perform random acts of kindness wherever you go. They may be as simple as offering a kind word and smile to someone in need, or paying for something forward for the next person to enjoy.

Kindness doesn’t have a measurement and it can go a really  long way.

We hope you enjoyed going through the list of resolutions with us this year as much as we did! And remember to keep looking out for our blog for more articles on Real Estate investing. 

Closing costs

There are a lot of costs associated with the closing of the deal that you need to keep in mind. On average the closing costs can usually add up to 2% to 5% of the value of the property.

Some expenses may be inconsequential, but others like the home inspection and appraisal needed to close may add up to hundreds of dollars. 

 

Property taxes

Most times, the property taxes you need to pay will be added to the mortgage premium each month, so it is easy to forget to factor them in, but it is important to know how much you will have to pay so that you have a good idea of how to plan  your month to month finances.

It is also important to remember that, most times, the property taxes will rise each year. This means you need to think ahead into the future to make sure you can comfortably afford it each month.

Insurance

Like property taxes, the home insurance will more likely be paid each month with your mortgage payment, but you want to make sure you do your research and find the perfect insurance company to lower your monthly costs and get the best service possible, and you need to make sure you factor that in as well.

Renovations

Unless you buy a turnkey property, you may need to do some renovations, or at least give maintenance to some area of the property you bought. Don’t underestimate these costs! They may add up to a lot of money and could put you in financial strain. 

Being smart and thorough with the math before closing on the property you want can help you avoid a lot of stress. If you feel like you need more guidance, remember you can always contact us to guide you through everything!

 

Research (1-14 days)

You need to take your time to know what you are looking for. Do your research on the area you are interested in, you can use the blog post mentioned above to see what you need to ask yourself before you start looking for a property.

Find an agent (7 days)

Your agent will be your most trusted advisor during the whole buying process, so you want to make sure you pick the right one. 

If you need help, you can ask your family, friends or other investors for any suggestions. A good agent will help you navigate through everything and will be able to help you land a good deal.

Get pre-approved (8-10 days)

It is better to be pre-approved for a loan if possible, since that will tell the owner that you are serious about buying the property. It is also important to get an early start on the process so you have the time to gather the necessary documents and to give the lender company time to work through their processes without pressure.

House hunt (Depends, from 7 days to a few months)

This step might be the most entertaining one since it involves scouting several areas and visiting several properties, but it can also be tiring. The time it takes depends on a lot of things such as your needs, the inventory in the area you want and the time of year.

Make an offer, negotiate and sign the contract (1-7 days)

In this stage you will need your agent to work with you to get the right price, and to walk you through the contingencies and other aspects of the contract. You will want to give the buyer 1% – 6% earnest money and have your pre approval letter ready to be sent. 

In case the seller counteroffers, make sure you respond as quickly as possible so you don’t lose the property.

Get a final approval on the mortgage (21 - 30 days)

After your offer is accepted, you need to work out a few more things. The lender you chose will need you to gather more financial and personal documents. Some other things they will require are:

• Home inspection – The inspection itself will only take about 2-3 hours, but you want to make sure you schedule it at least 3 days in advance to make sure the company gets it done on time.

• Home appraisal -Again, the appraisal will only take a few hours, but you should schedule it up to 5 days in advance since it will take some time to file the report to your lender and for them to process it.

If you are lost on appraisals, you can read our article on it here.

You need to start with the mortgage approval as soon as possible since you will most likely have to work on several things at once.

Close on the property (40-50 days)

Some final items you need to take care of are the final walk through to check that the repairs have been completed and that no other damages have appeared, finding a homeowners insurance company and signing the final contract. 

 

Even though this whole process may seem like a lot, it is completely worth it! Keep calm and enjoy every step of the way until you finally get the keys.