Smart Shopping: Avoiding The Most common Real Estate Mistakes:

by Mia Bolaris-Forget (Staff Writer NYCityWeddings)

Just before or right after the nuptials many couples get “Future Fever” and start thinking about better jobs, starting a family and investing in some property and a home.

In fact, with the guarantee that real estate is the one investment that doesn’t loose, but rather gains in value, it becomes quite easy for many couples to catch the real estate bug.

While this, in theory is an excellent idea, experts assert that it’s also one often wrought with potential disasters since many fall into the property owner pitfalls most common when dealing with real estate.

Consider using your “investment” as a moneymaking venture and rethink a two story or two-family home that can ease the mortgage payment through rental income. And, try to avoid the following faux pas:

1. Thinking With Your Heart Not Your Head: Sure you may LOVE and ADORE a particular property, but is it practical. Experts suggest that when looking at property think like an investor and business owner, not like a homeowner, getting emotional about the deal, not the home.

2. Failing To Exercise Due Diligence: Doing your homework was important in school, because it becomes important in the “Real World” as well. Besides conducting the inspection, experts suggest looking into other aspects of the property you are interested in. Investigate the area’s current rental market, the vacancy rates and average rents for comparable units. Also look into the average age of the rental housing stock, how the neighborhood is zoned, what the government regulations are regarding rental property and if (the) City Hall has approved new rental complexes in the local vicinity.

3. Overlooking The Rule Of Home Improvements: Unless the property is already zoned and constructed to start earning you (another) income immediately, you need to remember that it generally takes linger and costs more to complete your final project and/or rent. This cost (and loss of income) needs to be factored into your total expenses.

4. Putting Credence And Faith In Advertised Rates: Advertised rates you see on TV are typically for owner-occupied homes. Investment property is seen as a riskier loan with more points attached and a higher interest rate. Experts suggest you should expect about an additional 1.5 points or half a percent more in interest. Credit standards will also be greater; and while perfect credit is not necessary, poor credit won’t get you the loan and you won’t get many low-down or zero-down payment offers.

5. Taking Tenants At Face Value: Most people these days are smart enough to polish up their appearance and disposition when searching for a place to live, whether they are buying or renting…and renters are often quite good at coming across as rent “friendly”. Because homeowners and landlords are often excited about collecting that extra cash and not having a vacant space, they tend to eagerly and easily jump on the rental bandwagon. But experts reproach that approach. Instead, it’s best to have them fill out an application, look into their credit and references as well as their employment and rental history. Remember, the laws are FOR the tenant and getting rid of a bad one can be a lengthy and costly process. It’s better to take your time now than losing time and rental income later.

6. Bending Or Breaking Your Own Rules: Remember, tenants will NEVER take care of your property as well as you or as you’d like, so rules and regulations are essential and for YOUR own benefit and protection. Once you start compromising you are also compromising being taken seriously with regards to other issues and may run into serious problems with those you are renting to. Also, NEVER let anyone move in without a security deposit, and don’t ignore collecting late fees.

7. Making Out Of Town Investments: Unless you plan on visiting frequently or have someone you know and implicitly trust, it’s best to invest ONLY in property that is near enough to keep up with and to keep an eye on. Otherwise you may be in for some “rude” surprises and/or may eat up you profits by going back and forth to manage the property or paying for someone to.

8. Selling YOURSELF Short By Paying Someone Else Too Much: It’s imperative to know emphatically what the property you are looking at and other property in the area is going for and is worth. And, don’t be ashamed to make a low-ball offer. Rental property owners generally work off a multiple of 100, which means that if you pay $100,000 for a unit, you need to collect $1,000 a month in rent to pay all the bills and have a decent profit margin.

9. Ignoring The Competition: Know what your neighbors are doing. Note why he or she is able to rent and you are not, even if it means asking questions. Inquire what he or she is asking, if he or she accepts pets, families, has a washer, dryer and/or other amenities. This will help you rent our YOUR unit faster, ask the right price, or hold out until you find the right tenant.

10. Underinsuring Your Assets: Insurance on rental property means more than just insuring the building against fire or hurricane. It also means looking at your own policy for liability, especially if there’s any possibility of being sued.