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Beware These Pitfalls When Investing in Real Estate

Investing, Real Estate / 17 Jan 2020

If you haven’t dripped your toes into the world of real-estate investing yet, then perhaps now is the time to consider the possibility of doing so. There are all kinds of reasons why you should, as we discussed here. However…

Care needs to be taken. Investing in real estate isn’t as simple as buying and selling a house for profit, and becoming a landlord isn’t always the profitable venture that some imagine. With any type of real estate investment, there are potential pitfalls, and we will discuss some of them in this article.

Pitfall #1: Buying a Property in the Wrong Location

When looking for properties to buy, you need to pay close attention to the location. If other properties in the area have been on the market for a long time, then you might struggle to sell or rent out the house you buy. There could be specific issues to consider around this, such as a high crime rate, which could be off-putting to potential buyers and renters, or an economic downturn in the region. Before buying a property then, put in the relevant research. Check local crime rates, speak to real estate agents for their advice on the locale, and visit the area yourself, and try to ascertain a feel for the place. If you are uncertain about the location, then move on. There will be more desirable areas to pick from, and while house prices might be higher elsewhere, they might be a better investment.

Pitfall #2: Making Bad Decisions Because You Have Worked Alone

This isn’t something you should be doing solo. While you don’t need to employ people to work with you full-time, you still need to have the contact details of those professionals who can help you make a success of your investments. So, you should find a decent real estate agent, as they will help you choose the right property for your budget. You should work with a home inspector, as he or she will help you spot any maintenance problems within the properties you are considering. And if you’re planning on renovating or remodeling any properties, you should hire those people who might be able to do a better job of the tasks involved than you. We are thinking of plumbers, painters, and flooring installers, as just a few examples. Of course, we aren’t only talking about finding help at the outset of your endeavors. You should keep some of these people on speed dial, because you might need their help in the future.

Pitfall #3: Losing Money on the Property

It could happen! If you buy a house that is beset with maintenance problems, you might lose a lot  of money after spending a fortune on repair bills trying to put things right. If you buy a house in the wrong location, you might lose money when buyers or tenants fail to take an interest in the property you have to offer. And if you spend money without factoring in the expected and unexpected expenses that come with a house, such as maintenance, insurance, and mortgage fees, you might make losses. So, do as we have already suggested and seek the help of a real estate agent and home inspector before signing on any dotted line. Work with an accountant and seek support with budgeting. And then commit to research on finding a property worth investing in, and on something that falls within the remit of what you can realistically afford.

Pitfall #4: Renting Your Property to a Bad Tenant

When we say bad tenants, we are talking about those who fail to pay you on time or those who fail to pay you at all. We are talking about those tenants who damage your property, perhaps because of the lifestyles they lead. And we are talking about those tenants who disappear in the middle of the night, leaving with you unpaid bills to sort out, as well as cleaning and repair jobs to manage. These are headaches, both literal and financial, that you don’t need in your life. So, if you are intending on becoming a landlord (or a landlady), carry out the requisite checks first. You might want to run a credit check, for example, as well as a criminal background check. It’s important to take up references too, so ask for the details of the people your prospective tenants have previously rented from. And follow your instincts – if something doesn’t seem right about the people who apply to rent your property, then think twice before handing it over to them.

For more advice, follow these tips on finding the right tenant for your rental.

Pitfall #5: Landing Yourself in Legal Trouble

If you’re prejudiced when choosing tenants, you might find yourself at the center of a legal battle if the people you turn away take you to court. If you sell or rent out a house that is beset with health and safety issues, you might also find yourself on the wrong side of the law. And if you make improvements on the property without permission from the local authorities, then you are going to face a hefty fine and potential losses on your investment. So, be mindful. If you’re new to real-estate investing, seek legal help from a real-estate lawyer, and find out about the laws and regulations that need to be followed. And use your common sense too! You know it’s morally wrong to show prejudice to others, and you know it would be unwise of you to sell or rent a property that isn’t ready to live in, so don’t! The more research you put in, and the more care you show for your properties, the less trouble you will face in the future.


After listing these pitfalls, you might decide against real estate investing in the first place. It might seem like too much of a minefield! However, don’t be put off. By doing your homework, and by surrounding yourself with the right people, you can make a successful career from real estate. You might even make your fortune too! So, heed our warnings, and then follow our advice to protect yourself from trouble.

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