Many people see buying real estate as the best way to save their money. And this decision is the right one, especially in the context in which we find ourselves today. Despite this, there are very common beliefs that an investor can fall into when betting on the brick . These ideas are usually myths that could completely break the initial idea of investing to take care of money and earn.
In this note we will detail 10 of the mistakes that you have to avoid if what you want is to invest in real estate , but you have to know that, perhaps, there are many more. Let’s go to them!
Nothing is forever
Sometimes we feel that because we were successful at something, it will always be that way. No, it may not be. There is a possibility that an experience has been successful, but we cannot know in advance what future ones will be like.
Perhaps a purchase was made very satisfactorily, but the next time we make we have to be vigilant, because the situation will not be the same. The economic fluctuations and the cyclical depreciation of the dollar take center stage in each transaction we make.
The well is a good deal (sometimes)
Buying in the well is seen as a great deal, but let us tell you that this is not always the case. This will depend on the phase of the cycle that the market is going through. And, as we well know, in our country, buying in a well will be tied to the value of the dollar. To avoid being left in the middle of construction and not knowing how or when to resume it, it is important to work with responsible construction companies. Take advantage of the time to thoroughly investigate the projects in which you have participated and the financial support they have to deal with possible problems.
It also happens that when investing in real estate you will never lose capital. It is important to know that any investment we make will have a minimum of risk. We refer to the falls in the values of some assets. This risk, among others, is always present and we have to be prepared to assume losses, should they occur.
Do not fall in love with the “Premium”
Although Premium properties and the best locations are the first thing you win, it is important to know that this can be transitory. That is, it will depend on the moment in which the purchase is made.
There are types of category (A,B,C, from highest to lowest value due to its location and type of construction). And each of them has its moment of glory. The Premium ones are the ones that are sold first, but when they reach their historical price they stop being a business and the opportunities turn to those of class B or C. These have better rental profitability. You have to understand when to buy and when to sell.
Believing only in rental income
Understanding the annual return of a real estate asset is to consider all the income and expenses made for the real estate operation. We cannot leave aside expenses that reduce profitability, such as notary public costs, property registration procedures, real estate… all necessary for the operation.
retain real estate
Another false idea is to buy a property and never sell it. The returns obtained by acquiring an asset and keeping it in the long-term portfolio are usually very low.
The best performance of the asset is obtained when it is maintained at the moments in which the upward price curves are more pronounced and is sold when it begins to plateau. With what is obtained, another property must be acquired that is in a process of greater acceleration of value.
just think about building
Sometimes it is believed that because you build you earn money. To build works, strong economies of scale are needed. To generate profitability and for it to be sustainable over time, the investor should shift construction from one type of asset to another and from one market to another, taking advantage of their cycles. And above all, leave the task of building to someone who knows how to do it and does it on a regular basis.
The true profitability
Believing that rental profitability is obtained by taking the rental value and subtracting the real estate tax is another myth. Actually, you have to take into account many variables that are the ones that ultimately impact performance. By deducting these concepts, the theoretical profitability that real estate agents generally provide is almost halved.
Get carried away by a guaranteed income
Sometimes offering a guaranteed income is seen as good business. Even as a safe option. Maybe it is, but for a very short time. This offer is usually made to make the operation more attractive, but to offset the cost of that guarantee, the price of the asset will be overpriced. This will eventually affect you. And when the warranty period ends, the performance will be lower. When it’s time to sell it, you’ll end up selling it for less than you paid.
Rely only on traditional purchase
Sometimes we only trust the purchase of real estate from a bank or, perhaps at auction. Even a developer. It may be a good business, but it is also advisable to have more knowledge and experience. Sometimes buying this way you pay prices above market value and many are unaware of it.
Knowing the market and, above all, the real estate sector will help you avoid falling into these 10 myths and making mistakes when buying a property. Each operation needs a real estate agent who will carry out a detailed analysis in order to achieve excellent profitability.