Renovating could make you a lot of money, but there are potential dangers that even seasoned investors fall prey to:
1. Getting Emotional
Everyone likes something shiny right? When people get emotionally attached to that amazing porch, it clouds their judgment. I would recommend when buying investment properties have the tools and experience to do so!
2. No Reserve
A huge pitfall that grabs hold of new investors is putting everything they have into a deal and not leaving anything in the bank for emergencies. Guess what? Things happen! Trees fall, roofs leak, appliances break, rent comes in late or not at all. Even if a deal is great, if you do not have enough capital in the bank to support it for a few months you may end up liquidating it or other assets to balance your ship.
3. Information Overload
Too much analysis leads to paralysis. I have some clients doing PHD before buying; you cannot succeed in Real Estate without actually buying some. So act!
4. Rushing in and buying something with only marginal profit.
5. Assuming that buying something cheap is automatically a good renovation
6. Not understanding the area in which you want to renovate
7. Not researching/knowing you’re likely selling price
8. Not planning and costing your renovation before you start work
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