Common Pitfalls of Real Estate Investing and How to Avoid Them in San Jose

When you’re buying your first rental property, it’s easy to make mistakes, and even experienced real estate investors have a hard time avoiding common pitfalls. There are a lot of details and requirements to navigate when you’re looking for San Jose investment properties, and errors should be expected. The problems get unruly when those errors are expensive or come with legal risks.

As experienced property managers in San Jose, we help investors and property owners avoid the most dangerous mistakes. Today, we want to talk about some of those pitfalls that can set you back and derail your investment plans.

Forget Getting Rich Quick

One major mistake is the idea that you can start flipping houses today and make a million dollars in weeks or months. Real estate investing has the potential to earn a lot of money for you and establish some wealth for the future. But, it’s not a get rich quick scheme.

You’ve probably heard it before: this is a marathon, not a spring. Invest in the long term benefits of real estate. This is especially important in the San Jose real estate market. To really earn any type of return on your investment, you can expect to hold and rent out your property for at least five or 10 years, maybe even longer if you really want to earn some serious money.

San Jose rental homes are not going to have huge cash flow margins, especially not right away. Smart investors realize that it’s still a good investment if a tenant is paying some part of your mortgage and expenses every month.

Budget Generously for Expenses

There will always be costs associated with leasing, maintaining, and managing a rental property. In fact, those costs will likely be more than you expect – so plan for that. We often encounter investors who forgot to factor in the cost of vacancy or tenant turnovers. Or, they don’t think about the costs involved in routine maintenance issues and even emergencies.

You’ll have to pay property taxes and insurance. Make sure that you do some budgeting that includes all these expenses you’re not anticipating. An eviction, for example, isn’t likely, but you should still have a reserve fund for potential legal issues and tenant disputes.

Invest in the Right San Jose Rental Property

Sometimes investors can get emotionally involved in the properties they’re buying. A common pitfall is trying to buy a home you’d like to live in yourself. As an investor, you have to remember you’re not looking for your own home. You’re looking for a property that tenants will find appealing, so you have to think like a San Jose tenant. Tenants want clean, well-maintained homes close to good schools, work, and recreation. They don’t care as much as you do about stainless steel appliances and tile floors.

Legal Mistakes and San Jose Rental Laws

Legal Mistakes and San Jose Rental LawsThe laws have changed dramatically in California when it comes to renting out property. There is now statewide rent control and a just cause eviction mandate. Section 8 tenants must have their housing vouchers considered as income, and you can’t always use an applicant’s criminal background in the screening process. There are security deposit regulations, accommodations for service and support animals, and habitability laws that are strict and constantly being updated.

If you don’t know the laws, you are in danger of making a big and expensive mistake. Staying up to date on those laws is time-consuming and often frustrating. If you’re not working with a San Jose property management company, you’re taking on a lot of unnecessary risk.

We’d love to talk to you more about how to avoid some of the more common investment pitfalls. Contact us at Real Estate Connections, and we’ll tell you more about how to be a better investor.