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To succeed in real estate, new investors must avoid common traps that lead to devastating financial consequences. Unfortunately, the housing market is filled with too many predatory lenders, defaults and foreclosures. With such a shaky outlook in real estate, some new investors just give up before they even start. However, with the proper amount of due-diligence and learning how to avoid common traps, real estate is still a lucrative investment.

 

Research, Research and More Research 
There is no emphasizing this point enough. Real estate investors must research any property thoroughly before making a commitment. Too many new investors make the mistake of not researching an investment property enough before they buy. Another cardinal sin is buying the first home they come across. New investors should always ask themselves how buying any investment property will benefit them financially.

 

Letting Emotions Get in the Way
Another big problem is many investors get emotionally attached to their properties. Some investors will “fall in love” with properties and start to tailor investment homes to their own personal tastes. This trap kills a home’s appeal to the public at large. A successful real estate investing career requires people to keep their emotions out of any decision. New investors must always think about how buying properties affects them financially.

 

Putting as Little Down as Possible 
Unfortunately, many newer investors try to put as little money down as possible at closing. This thinking immediately overextends investors by leaving a large amount of debt on the table. Keep in mind that by putting less than 20 percent down, lenders will require mortgage borrowers to buy private mortgage insurance that costs thousands of dollars per year.

 

A smaller down payment also increases interest rates on mortgages leading to much higher monthly payments. This is where thinking in terms of financial benefit has a huge impact on investments. By putting more than 20 percent down on a home, investors immediately have 20 percent or more equity in their properties.

 

Some investment experts say that investing in real estate is as safe as investing in gold. Both have a tangible benefit with real financial potential. However, all investments carry some type of risk. Learning to identify the risks that are common to each investment type can help any investor continually generate lifelong wealth.