How to Avoid Mistakes Beginner Investors Make



Investing in rentals can be a great way of growing a fortune by having renters pay for your investment. It can also be an ongoing headache if you don’t take steps to avoid these common mistakes most beginning investors make.

Serious investors

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Not keeping an eye on the property

A fellow investor once found his rental house destroyed after the renter moved three of her friends and 15 kids into an 800 square foot house. The rent check was coming in every month and no one was complaining of repairs needing to be made. He thought everything was good and just sat back collecting the rent. Of course, two years later, when she moved out he thought a bomb had gone off in the house.

Visit your tenants occasionally

Do it frequently when they first move in. Just knock on the front door and ask them how everything is going. If they complain about something being broken, you can go inside to see what the problem is. You will save yourself a lot of trouble just by checking up once in awhile.

Not having a set of rules

Have a written set of rules that tenants sign when they sign the lease. If they break the rules, they break the lease and you can make them move out. These rules don’t need to be complicated. No music or noise that can be heard outside after 9pm. No illegal activities. Rent is due before the 3rd of the month. Late rent results in a 10% penalty. Only people listed on the lease are allowed to live in the house. No stickers or decals on the walls or ceiling.

Not making repairs promptly

Many beginning investors work a full time job. The investment house needs repairs periodically but they procrastinate because of time and money. Small repairs have a way of snowballing into big repairs costing a lot more. If you don’t maintain the property, good tenants will move out and you’ll soon be renting to problem tenants at a lower price.

Mange your property

Many beginners treat the property as a hobby. It’s not a hobby, it’s a business. Before you buy, you need to know the numbers. Know what your return on investment will be. Keep good accounting books so that you can write expenses off your taxes. Keep good repair records. Over the years, you’ll buy new appliances and other features for the house. Some day you’ll want to sell the house and being able to show repairs, maintenance, and improvement records brings you a higher selling price.

Avoiding these simple mistakes will make your early investing experience much more pleasurable and profitable.

 

About the author: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years.