THE BLOG
02/03/2016 12:16 pm ET Updated Feb 03, 2017

Five Mistakes Entrepreneurs Make When Buying Real Estate

Real estate is one of the largest source of wealth in America. In fact, many entrepreneurs begin investing in real estate to build and protect their wealth once they "make it". However, when it comes to investing in real estate, there is a great deal of room for error. There are countless investors who make high return realty investments, but there are also many who lose just as much from their investments. If you are considering investing in real estate, then it is important that you know five of the most common mistakes that real estate investors tend to make. Do your best to avoid these pitfalls and you can be on your way to the successful real estate investment you have always dreamed of. We caught up with Rey Grabato, the founder of National Really Investment Advisors which has 10 years of experience in real estate investments and has completed more than 600 projects for high net worth clients, to learn what the biggest mistakes are that he has seen investors make.

They Don't Do Their Homework

There is a lot of research and planning that needs to go into making a sound real estate investment. While many assume that most investors do their homework on an opportunity before jumping on it, the truth of the matter is that most investors simply do not. There are many people who are presented with a real estate "opportunity" and think that they need to jump on it right away in order to get in on the action. Yes, maybe a few investors are able to find a diamond in the rough in this way, but typically the best approach is to take your time, do your homework and make sure you are making a smart decision.

They Don't Do Any Ground-Level Planning

According to the NRIA, one of the biggest early mistakes that investors tend to make when buying real estate is that they have no ground level planning. According to the company "it is important to outline your expectations from your real estate investment before you make your move." You have to take the time to really map-out a plan for your investment and how you are planning on making money off of your investment right away. Do you want to earn equity instantly by selling, or are you looking more for long-term rental benefits? You need to know the route you are going to take right away, before you even seriously consider buying.

They Listen to the Wrong People

There are so many people out there who think they "know" a great deal about real estate, about development projects or up and coming areas. These people are always some of the most willing individuals when it comes to giving advice. You should never listen to real estate investing advice from anyone who has never invested in real estate before. Until you have done it, you have no idea what getting into this type of investing entails.

They Buy Only For Appreciation

There are some investors who will invest in rental properties or home them want to fix and flip, hoping only for appreciation. This is skating on thin ice. Rental properties can slowly cost more and more money than you ever expected if you aren't careful, and if you fix and flip the wrong house, it can easily set you back a great deal. You need to consider buying below market value and cash flow for these types of properties. While you can plan to have appreciation on your property, it shouldn't be the only factor in your business plan.

They Overpay

It may seem like a very easy mistake to avoid, but there are so many real estate investors who unfortunately end up overpaying for a property. It can be easy to become anxious over buying a property or finding the right investment opportunity. These anxious feelings can easily make anyone jump the gun too quickly and overbid on a property they are considering. Nothing takes a toll on an investment like overpaying, because from the moment you sign the paperwork, you are already putting yourself in a whole regarding what you can and should be making from your investment. Take the time to research pricing and have the control to know when to walk away, it will only benefit you moving forward in all of your real estate investment ventures.