Mistakes of novice investors

Mistakes of novice investors: how to invest in real estate correctly


Frivolous and naive approach

In most cases, investors are deceived by “status”. People are too quick to identify themselves as part of the investor community, and as a result, they approach the issue of investing too superficially and too lightly. This approach combines several typical practical errors:

  • Selection of an option for an apartment or house “for yourself” and not “for profit”.
  • Even when choosing real estate “for profit”, they are guided by their taste.
  • Missing or insufficient analysis of the foreign market in which the investment is directed.
  • Lack of clear calculations, a clear step-by-step investment plan, and underestimation of planning.

Let's consider each mistake in more detail to understand how to invest in overseas real estate correctly.

Selection of real estate “for yourself” and not “for investment”

Beginning investors very often confuse the picture of “the ideal home they would choose for themselves” with the reality that will provide the opportunity to maximize profits. The apartment or house you choose for long-term housing will be very different from the one that will give you the most liquidity or rental income.

Here you need to imagine the goals for which this or that property is acquired and rely on numbers and calculations more than on feelings and emotions.

Orientation to your taste

Even when choosing an apartment or house for profit, investors often look at a real estate like tourists. Even after spending a couple of weeks in the country, you will not be able to get rid of this look. What seems very attractive in the first few days may not be suitable at all for a longer stay. For example, an apartment by the sea is not so good when it is planned to live in it all year round. There are very few countries where an apartment by the sea will be as good in winter as it is in summer.

From January to March, apartments close to the sea usually have higher heating costs, piercing winds blow there and the apartments can cool significantly. The apartment will have a terrace, but due to the cold, it will not be possible to use it.

The sea view itself is also not always a good choice: in summer, the sun can reflect from the water all day long, which blinds the eyes and additionally heats the house, so you have to keep the curtains and blinds closed all day. And at night, the sea turns into a dark spot and a beautiful view can not be seen again. At the same time, apartments and houses by the sea are much more expensive than the same, but 400-500 meters from the coast.

Therefore, housing directly by the sea is well suited for short-term rentals (and not for all tourists, Europeans, for example, prefer just another option), and if you are planning a long-term rental, it is better to take housing that is more spacious and cheaper, but a little further.

In addition, an apartment directly by the sea can be severely affected by moisture. In such an apartment, it is necessary to constantly ventilate the premises, which means that the apartment is not fully loaded by tenants - this is a threat of mold, damage to furniture, etc. Also, the facades of houses built using modern technologies become obsolete faster. Therefore, an apartment directly by the sea has a lot of nuances that must be taken into account. Another important point is the noise on the first line. There are always beaches, restaurants, and bars and the whole season is a zone of increased noise. Cars are constantly parked here, traffic jams arise and this is often a hindrance for those who want a more relaxed environment or for families with children.

Missing or insufficient analysis of the overseas real estate market

A typical situation is when an investor understands several googled articles or posts on social networks as market analysis. To properly invest in overseas real estate, follow these guidelines:

Firstly, a good analysis can only be done by specialists with extensive experience in a particular real estate market.

Secondly, even if you decide to do it yourself, it will not be superfluous to remind yourself of the saying “measure seven times, cut one”. Check all the numbers and facts MANY times. Preferably from various sources. Even serious statistical centers and portals often give out averaged data that differ greatly from the real situation even in different regions or provinces of the same country. Not to mention different countries.

Third, look for official sources. Articles on a real estate website are good, but they can only serve as a guide to the topic. Market analysis should always be carried out according to official figures and statistics. And it is best to hire professionals for this or use their blog, who will add their own real experience to the statistics.