Which Real estate mistake should you absolutely avoid. I am going to share my 4 biggest mistakes.
00:00 Advantages Real Estate
Leveraging your own money to purchase real estate. You don’t have to use all your money to purchase real estate. Very often, you will have to pay 30% of the purchasing price of the property,
and the bank will pay 70% of the remaining part, and with that you will own the property and need to pay off the mortgage to the bank.
Equity growth as well as monthly income. Properties will grow in value with about 3% in equity on average each year. And the only thing you need to do for that, is to have someone live in your property and pay you rent.
Stability, When you think investing in stocks is boring, as you don’t really have to do anything for the stocks to grow in value. Stocks do go up and down the moment something interesting happens in the world. Whereas for real estate investing might even be more boring.
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03:58 Mistake 1: Getting the wrong tenant in your property
Some people look on paper like there is nothing wrong with them. But what’s on paper does not always apply for the reality. And so I have learned. Because I made the mistake to pick the wrong tenant, just because I wanted to have someone my property as soon as possible. And what happened? The tenant made a mess, didn’t pay rent and even worse, destroyed the inside of my property. And this not only happened to me once, but twice. So sometimes its better to wait till you find a good tenant.
07:54 Mistake 2: Getting the wrong mortgage payment plan:
As an investor, you get several choices from the bank when you apply for a mortgage.
Option 1: Only pay off interest rate, each and every month and no principal at all. You do this until the end of the mortgage period, and then you pay off the whole mortgage principal at once.
Option 2: Take a loan of only for 10 or 20 years. Meaning you do not have the 30 years to pay off your loan, but it needs to be paid off faster, causing your monthly expenses to be far higher.
Now, for us investors.. paying off a mortgage faster should not be our first priority and therefore,
this is just silly.
Option 3: taking the first offer you get from the bank, meaning in most cases, the highest interest rate.
I think I have been a dumb investor in the past, because all three of these mistakes I’ve come across myself, and I’ve seen my clients do before, although yet, I told them to pay attention to this. It is human nature to do what feels right at that particular moment, and sometimes you just got to make a mistake to see the mistake. The second solution is to refinance your properties at a later stage, when your properties have grown in equity for example. Then you can ask your real estate appraiser to take a look at the current value of your properties, and if it’s a good deal. You can apply for a new mortgage and with that, all the options for the mortgage will be open again, as you have paid off the first mortgage, to be able to get a new mortgage.
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be sure to come back again, for part 2 of Real Estate Mistakes