4 Key Risks of Domestic Real Estate Investing

While investing in domestic real estate is simple in theory, it’s rarely easy in its execution. There is much involved, from the banks stringent requirements to the glut of paperwork to overriding labor to the market conditions. Even beyond the hardships associated with due process and protocols of purchasing domestic real estate as an investment, there are a myriad of ‘controllable risks’ that, if not ignored, can threaten, undermine and even devastate an investment at large.

There are 3 key mistakes every domestic real investor must know:

1.)     Mistake #1: Price perception. Simply put: do not assume that a low price is a good deal. Far too many make price the determining factor, and don’t consider a plethora of other important deal terns that can make or break an investment – especially for short-term investors like baby      boomers.

2.)     Mistake #2: Contracts and paperwork. It’s imperative for you or a legal representative to actually read all of the language in any contract or piece of paper you sign, however copious that may be. There can be terms that are not conducive to property investing, such as “deed restrictions” that limit the allowable percentage markup on resale.

3.)     Mistake #3: Exit strategy.  In the realm of real estate investing, not having a clearly defined, pre-planned exit strategy even before purchasing a property can be financial death knell. Knowing you will ultimately re-sell a property at the onset requires that you consider – and actually vet – all viable options and channels suited for the property at hand.  While many investors choose to rehab and flip properties themselves, another highly profitable strategy to consider is simply wholesaling it to another investor “as is.” This can reduce your financial exposure and liquidity to facilitate future investments.