Overpaying for Real Estate Eats Profits: Paying the Right Price is Essential but Complicated for the Investor

Driven by visions of easy money, many people leap into buying investment properties with great enthusiasm but little preparation and foresight. Real estate investing is a business, and as in any business, there are problems and challenges. Nonetheless, many of these obstacles can be anticipated and avoided. Overpaying for property is one of the most common but avoidable errors committed by novice investors.

Local Patterns Trump National Trends

Despite the screaming headlines about mortgage meltdowns and plummeting real estate prices, many experts stress that buyers must focus on what is happening in their local markets. Supply and demand and, consequently, pricing and sales patterns can vary widely from state to state and even neighborhood to neighborhood. To be well-informed and well-positioned to choose wisely, investors must keep tabs on this type of data by questioning real estate agents, reading local newspapers, exploring target areas, and speaking with residents there.

Patience Pays Profits on Income-Producing Property

Purchasers of property have long heard the maxim that profits are made when a property is bought, not when it is sold. This means that, when selling property, those who paid more than necessary for it will not make as much money as they could have if they had negotiated a lower purchase price.

Real estate agents have noted that buyers have no sense of urgency in stalled markets. Instead, savvy buyers are patient enough to wait for sellers to further slash their asking prices, says Mike, a realtor Dallas. (more…)