Many people are shifting from stock market investments to more tangible assets in their portfolios. Real estate investments are typically the most common tangible asset that investors begin with
However, real estate can be expensive and high-risk if you’re not familiar with what you’re doing. Avoid these common investment property mistakes buyers make in Kansas City.
4 Common Investment Property Mistakes Buyers Make in Kansas City
Underestimating Costs
Many first-time real estate investors believe in the saying, “If you buy it they will come,” assuming that acquiring a property title will automatically attract renters and generate income. However, this is far from reality.
First-time investors often overlook various costs that can end up surprising them because they failed to consider these when estimating potential rents. These unexpected expenses may include maintenance, advertising, and repairs. Unlike personal residences where one might delay a repair, landlords are required to address issues promptly.
Furthermore, in the world of real estate investing, tenants may not always stay in the property for extended periods and could potentially cause damage during their occupancy. It is crucial to consider potential vacancy periods and the need for property rehabilitation between different tenant turnovers.
Poor Location Selection
It has been said over and over when it comes to real estate, “Location! Location! Location!” Real estate investments are no exception. Buying a property in an undesirable location can make it challenging to rent or resell.
While it’s true that fantastic opportunities can arise in struggling markets and less desirable neighborhoods, the risks might outweigh the benefits. In such areas, recouping your investment post-rehabilitation, let alone turning a profit, could prove to be quite challenging.
Revitalizing properties in high-potential neighborhoods can lead to significant profits, but it is crucial to grasp the associated risks. Conduct comprehensive research on the neighborhoods you are considering for investment in Kansas City to make informed decisions.
Leasing your property in high-risk neighborhoods may lead to increased challenges with maintenance and upkeep, such as vandalism, drug-related activities, and gang involvement.
Not Understanding Financing
Acquiring a personal property versus purchasing an investment property involves distinct financing principles. Financing options and rates for investment properties typically differ from those available for owner-occupied homes. Expenses such as insurance and property taxes also tend to be higher for investment properties.
When investing in real estate in Kansas City, be ready for elevated down payment requirements and potentially higher interest rates. It is crucial to conduct thorough market research to ensure that your property in Kansas City will generate sufficient rental income or sales proceeds to cover the increased costs and still generate a profit.
Failing to Perform Due Diligence
When preparing to rehab a property in Kansas City, it’s crucial not to overlook the essential due diligence steps required for successful real estate investing. This includes obtaining all necessary title reports, conducting thorough inspections, and ensuring that any property issues are properly documented in disclosures.
Discovering a significant lien on the property you’ve acquired through a sale could potentially result in foreclosure. Likewise, overlooking a possible foundation issue may result in unexpected costly repairs that were not included in your budget.
Buying a distressed property doesn’t have to mean you’re diving into a money pit. Learn how to evaluate properties, budget for repairs, and plan for unexpected expenses. Even with thorough due diligence, there are always unexpected costs when purchasing an investment property.
Start your real estate investment journey by beginning with smaller properties. Instead of diving into a million-dollar apartment complex right away, consider purchasing a single-family home or a small multi-family building for your initial investments in Kansas City. This approach allows for a more manageable learning curve, and if any mistakes occur, they will be easier to rectify.