So you're thinking about diving into the world of real estate investing? It's not uncommon to feel a bit overwhelmed at the beginning. Having a coach to guide you through those first few investments can calm your nerves. Buyer beware of charlatans that overpromise and set unrealistic expectations.
Some new investors in St. Louis have been told by a coach that the housing authority will pay the top of the HUD range for a 3-bedroom property, regardless of market rent, condition, or location. This misconception has led to unrealistic expectations among new investors in the area. The investor becomes disillusioned and starts blaming the local professionals trying to help him or her.
Another pitfall of new investors is the assumption that renter demand is the same in very low priced areas. Coaches are selling their students on the idea that they can buy a 3 bedroom house for a specific price...lower than the going rate in an area where there is high renter demand.
For example, in the St. Louis area, at a point in time, there was 1 individual with a Section 8 voucher looking for a place in Jennings while there were over 1,000 individuals searching in the City of St. Louis. We had a client who insisted on buying in Jennings where prices were better instead of buying in Florissant or the City of St. Louis where demand was higher...because the price was lower in Jennings.
Finally, it is expensive to renovate homes. Since Covid, materials prices have skyrocketed and inflation has caused increases in labor costs. Some investors buy houses that have been vacant for years and then the investor is surprised that the cost to renovate is north of $50,000. If you have to install a roof, electric wiring, HVAC, flooring, paint, kitchens. baths, lighting and finishes, your cost will easily be above $50,000. If you add exterior repairs and windows, the costs will be higher.
So, if you're looking to venture into the world of real estate investing, remember to tread carefully. It's easy to fall into the traps set by overpromising coaches and unrealistic expectations. Pay attention to the real market demand and the actual costs of renovation. Keep a level head and do your research, and you'll be on the right track to success in real estate investment.
Lisa Gallagher
Owner
Abriza Property Management
714-348-4301
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