🧱 1. Underestimating “Carry Costs”
When buying a property, most investors focus only on the purchase price and possible resale value. But the real costs of ownership stack up fast. These are called “carry costs”—things like mortgage payments, taxes, utilities, insurance, and general upkeep.
Let’s say you plan to sell in 12 months. What will it really cost to hold the property that entire time? Many investors get surprised by rising heating bills, lawn care expenses, or unexpected repairs.
🔑 Pro tip: Always build in at least a 10-15% buffer in your monthly carry cost estimates. It could make or break your deal.
đź’¸ 2. Forgetting the “Costs of Sale”
You don’t keep every dollar when you sell a property. In fact, you may need to sell it for 8–10% more than you paid just to break even.
Why? Because you’ll likely pay for agent commissions, transfer taxes, and closing fees. These costs quickly shrink your profits if you didn’t factor them in from the start.
📉 A $400,000 home could cost up to $40,000 in selling fees alone!
✅ Smart move: Always run the numbers on your expected return after subtracting these costs—not before.
🚪 3. Underestimating Vacancy and Eviction Risks
If your rental goes vacant, your profits disappear. If a tenant stops paying rent, eviction isn’t cheap—or quick.
Legal fees, court costs, and lost rent can crush your cash flow. To protect yourself, you need to plan for vacancy risk and eviction expenses.
đź’ˇ Try using safeguards like:
- Non-refundable deposits
- Sale/leaseback agreements
- Rent-to-own contracts
đź’Ľ 4. Tying Up All Your Cash (Lack of Liquidity)
Real estate is not a liquid asset. If you need cash fast, it might take months to sell the property. That’s why it’s risky to tie up all your capital.
Let’s say you have $500,000 to invest. Don’t put it all into one property. Keep some in cash to cover vacancies, repairs, or unexpected life events.
🛑 No one wants to be forced to sell in a down market.
🚀 Cash on the sidelines also lets you jump on new opportunities fast.
🧠Final Thought
The best real estate investors start with the end in mind. Before you buy, run your numbers—including carry costs, sale costs, vacancy risk, and liquidity.
đź“ž Need help building a smart plan? Let’s chat. As a Certified Mortgage Planning Specialist, I can help you map out every dollar and protect your profit