Why New Real Estate Investors Fail When They Buy Their First Rental Property

Investing in rental properties can be a lucrative way to build wealth, but many new investors stumble on their first deal. Here are some of the common reasons why new real estate investors fail and what you can do to avoid making these costly mistakes.

1. They Don’t Know the Area They're Buying In
   Lack of research on the neighborhood can lead to buying in areas where rents are not as high or the caliber of tenant can lead to higher defaults rate or larger repair/make ready cost when they move out. To avoid this, always investigate local market trends, crime rates, schools, and potential for property value appreciation. Know your area inside and out before making a purchase. It is advised to come and explore the area if you are not local to really get a good feel.  

2. They Have a Bad Realtor
   An inexperienced or untrustworthy realtor may push a property that doesn’t fit your investment goals. Even a realtor with a good back ground and experience may convince you to buy something that is not a good fit for your needs.  Most realtors work on commission and don't get paid till the deal closes.  So if they are showing you a lot of properties with out having you pull the trigger they might try and persuade you to buy something that is not a good fit.  Work with realtors who specialize in investment properties, have a good reputation, and fully understand the rental market. Don’t be afraid to interview several agents before deciding.

3. They Are Not Ready to Be Buying Real Estate
   Some investors rush into buying rental properties without fully understanding the commitment involved. It is a good idea to get a mentor who can guide you on your purchase and to really know the number.  A good lesson would be to evaluate 5-10 properties calculate rents, expenses and vacancies then factor in problems you might incur to know what to expect with rental properties.  Before making a purchase, make sure you’re financially and emotionally prepared for the demands of owning and managing real estate.

4. They Were Sold a Program That Oversimplified the Process
   Many new investors are lured into real estate by “get-rich-quick” programs that oversell how easy it is to make money. To avoid being misled, educate yourself thoroughly. Real estate investing involves careful planning, research, and ongoing management—it’s not a guaranteed path to fast money it is a slow a steady investment strategy that can be fruitful it you buy right and are patient.

5. They Do Not Have Enough Money to Cover Expenses and Vacancies
   Unexpected repairs, maintenance, and periods of vacancy can quickly drain your finances. This plays into the answer on #3  Always have a reserve fund to cover emergencies and a plan to manage cash flow during vacancy periods. Budget realistically and include more than just the purchase price in your calculations.

6. They Hire a Bad Property Manager or Try to Manage it Themselves
   A poor property manager can cost you in lost rent and poor upkeep. If you choose to self-manage, be sure you’re ready for the day-to-day responsibilities. If you hire, vet the property manager thoroughly—check references, reviews, and experience to ensure they can effectively handle the property. A good property manager can place tenants that stay in your place for a long time who are not risky and will take care of your property. 

7. They Try to Cut Corners
   Cutting corners on repairs or maintenance can lead to bigger expenses down the road, unhappy tenants, and a decrease in property value. Always prioritize quality work and proper upkeep, and avoid the temptation to save money by skipping essential improvements.

How to Avoid These Pitfalls

To ensure success with your first rental property, take these steps:

• Do your research on the local market and work with experienced professionals.
• Be financially prepared for both the initial investment and ongoing costs.
• Educate yourself thoroughly on the realities of property management and real estate investing.
• Don’t rush into any deals, and always focus on the long-term potential of your investment.

With careful planning, the right guidance, and a strong financial foundation, you can avoid the common mistakes and build a profitable rental portfolio. The Kansas City market is seeing a lot of investors coming to invest here because of affordibility of the properties but there are a number of inverstors that go bust because they quickly get in over their head because of the reasons above.  

At VP Property management we have helped many investors who got themselve into how water but doing one or multiple of these things listed above by cleaning up the tenants, making the properties desirable, and keeping good tenants happy.  Now it is our goal to work with landlords who want to avoid these issues and start off on the right foot with their investments. Fill out the inquiry form to get more information.