You do not want to be exposed by property investments in a market under these conditions. So always be alert and ready to sell.
9. Wrong estimates
Every time people try to estimate expenses they tend to calculate everything on the lower side while when it comes to profit projections usually the estimates are too optimistic. An investment that looks lucrative even under a bad case scenario is the one that you should go for.
So increase the estimated expenses to the maximum and add an extra 10 to 15 per cent unpredicted expenses.
Lower your expected returns using the minimum numbers and deduct another 10 per cent for unexpected market conditions. If you can still make money, then it is a good deal.
10. Exit Strategy?
What is that? Many people buy a property and get stuck with it because they do not have an exit strategy, or have only one option: they are going to sell it or rent it out. What if it does not sell? What if the rental market stalls? Always have two, if not three, ways to get out of any deal.
For example, if Plan A is to rehabilitate the house, put it on the market and resell it, then Plan B could be to offer a lease-purchase to a buyer. Plan C might be to hold the house and rent it out, while Plan D could be the wholesale option, which would involve selling to another investor at a below-market price.
Hopefully, you will still make a profit, but at the very least you will cut the losses you are taking every month in carrying costs.
The last one is maybe the most important thing that investors should always remember. If you cannot create a successful profitable investment, you must be ready to take the losses and stop the bleeding.
Most of the people who lost fortunes in real estate investments did not have a “stop loss” policy, stayed too long in investments that were losing value, and finally lost most of their assets.