Today I want to share with you two common mistakes that almost every new real estate investor makes and hopefully you can avoid making them yourself.
Underestimating Project Time & Cost
If you don’t estimate the time and effort required to perform each rehab, repair or consultative walk through your real estate business offers you will lose out and there is little you can do about it except learn from it. What you pay for an investment property you are going to sell is not the only cost to have in your head when you are pricing your property for sale. Considering how much your labor and materials cost for a service is only a part of your profit markup.
The best way to estimate time required to do the job is to do it once yourself or watch reliable contractor/handyman perform the task, then determine the appropriate budget that you would you need to be able to pay for services/materials and ensure that you make a profit. Here is a great video that covers estimating rehabs in 15 for real estate investors.
Selling Price/Rent Rates Too High/Low
Not knowing your market numbers and setting prices too high or too low. Notice I emphasized the word “your”. It is a common mistake to use a competitor’s fees as your pricing gauge without actually knowing why they use those numbers. Consider for a minute what will happen if you take a competitor’s price, cut it by 10% and then start selling.
What if the competition has a bad pricing structure and is barely making money or even losing money?
What if your costs are more than theirs?
Different market sectors have their own variables as far as selling prices go and you should be aware of them for your rehab project or home for lease.
While it's a good idea to know your market & competitors pricing structure and maybe even use it as a starting point you shouldn't base your whole strategy on it. How Investors Determine Fair Market Rent is a great quick training video that helps explains how Landlord investors may want to go about achieving a baseline for their property rental rates.