3 Common Mistakes That Veterans Make When Investing in Real Estate
Saving and investing are actions that everyone needs to pay more attention to. In the context of our military veterans, issues like homelessness sadly occur at shocking rates. In 2022, there were over 33,129 homeless veterans in the country.
Many of them realized too late that the skills they developed overseas often don’t carry over. Subsequently, addictions and run-ins with the law can make it tough to find stability again.
Thankfully, there is more awareness about this today, and service members are starting to plan and invest ahead of time. Real estate is one such area of investment that holds both success stories and cautionary tales.
It’s easy to be drawn in by the allure of profits and financial security. However, it’s equally easy to make mistakes if you don’t know what you are doing. The good news is that these mistakes are often avoidable.
If you are a veteran or a foreign service employee, real estate investment properties are one of the best options. Veterans are developing more long-term plans today.
They understand that success isn’t just about quick gains, but about building something substantial over time. In this article, let us explore three mistakes that veterans can avoid during real estate investing.
1. Not Doing Their Due Diligence
Due diligence is a critical step in the real estate investment process. Unfortunately, a lot of veterans can be hasty when investing, especially from abroad. Investing from a distance already comes with its own set of challenges. Rushing through the process will only amplify them.
You see, due diligence involves understanding not just the purchase price but also other things. For example, there are hidden costs that you might not consider in your initial P&L of the investment. Property taxes, potential renovation expenses, and other fees need to be explored thoroughly. These hidden costs can add up, and you might find yourself paying tens of thousands of dollars every year.
Similarly, if the property is intended for rental income, research the tenant market in the area. Veterans might assume a certain level of demand without proper research. Failing to do so can make it tough to find tenants. You might even end up with an empty property that you can’t find anyone interested in.
What else is involved in doing due diligence for an investment property? Understanding inspection terms is a huge mistake that is oftentimes missed by veteran real estate investors. Once under contract to buy a property, there’s sometimes a set deadline where you can inspect a property. You can adjust your offer or pull out during the inspection period (if that’s what your contract says). Make sure you understanding the details of these terms so you can avoid getting into an investment that isn’t as good as you first think.
Rent collection can also be problematic as some tenants may pay late. This is why knowing which properties to invest in is critical.
According to Passport REI, multi-family investment opportunities are one of the best alternative ways to build wealth. When you have multiple tenants, even if one tenant pays late, you aren’t fully dependent on them.
2. Neglecting Property Management
Veterans who invest from abroad can often underestimate how complicated property management is. They might believe that they can handle logistics over the phone or via email, but it’s really not that simple. Managing a property from a distance is tough. People can break into a home and vandalize the property. Some veterans are forced to learn the laws surrounding illegal squatters if someone breaks into their home. If you don’t manage the property tightly, bad things can happen.
Even minor issues tend to create unhappy tenants and complaints. Get lax, and you quickly realize that your property is not being taken care of properly. Before you know it, your property has lost value, and you start to regret your decision.
Some veterans might have a unique perspective on leadership and responsibility due to their military background. This can create a completely opposite situation where instead of neglecting the property, they micromanage it too much. This ends up driving away otherwise good tenants.
If you aren’t sure you can handle it well, delegate the responsibility to management professionals. Good property management starts very early and can almost feel like another job. If you are investing in real estate for passive income, do yourself a favor and get a property manager.
3. Emotional Decision Making
All of us are tempted to make decisions based on emotions from time to time. This isn’t a fault that’s exclusive to certain groups of people. That said, veterans seem to be a little more prone to it than others.
For instance, nostalgia can often cause you to over-value certain properties. We often see this from veterans who wish to invest in properties from their hometowns. The sentimental value can cause veterans to go against their better judgment and the realities of the real estate market. Similarly, they may have emotional ties to certain places because friends and other veterans have homes in a particular locality.
For those veterans investing from abroad, fear of missing out can be a major influence and cause poor investing decisions. This is made worse when some real estate agents use manipulative tactics just to close a sale quickly.
Being distant from the market means it’s tougher to have up-to-date information on local real estate conditions. Staying objective and not rushing into any hasty decisions will be extremely important. This is true for anyone investing in real estate.
Conclusion
Remember that while the allure of real estate is undeniable, it’s also a path that requires careful planning. You’re not just buying properties. Someone buying multiple homes is investing in a dream and in their financial future. Educate yourself about the local markets you’re interested in. Reach out to experts who know the ins and outs of those areas.
We can’t stress enough how essential it is to know someone who understands the heartbeat of a neighborhood. Someone who understands the rhythm of its rental market and the potential it holds for growth. Finding such people can make your life much easier.
Investing isn’t a path you need to navigate alone. Yes, it can feel risky to talk to people because of all the stories you read about people getting scammed. However, there are still many trustworthy people you can rely on.