When you decide to invest in residential property it can be much different than buying a home. Protect yourself and your investment with this guide.

Whether you’re a big-time real estate mogul, a small-time investor looking to get into the market or a young couple looking to buy your first home, there are some things to look out for in a residential property transaction. Being aware of the pitfalls will help you to avoid potentially disastrous mistakes when purchasing a residential property.

Lack of Planning

Real estate is a tough business. Planning your investments as you go along is not a way to ensure that your business or personal transaction will be a success. Make a plan and then find a house that fits in with your plan. Never tailor your investment strategy to the home that you want to buy. You will end up making the wrong decision.

Not Having Current Information

Do research on the market and make sure that you only consider relevant and recent information. While there are patterns in the real estate market over long periods of time, you should familiarize yourself with the most current information possible. Anything that you know about the broader real estate market is background. What is more important is having information that is relevant to the market that you are purchasing from. Have the property inspected by an independent professional. Research the neighborhood as well as the house itself. Remember that you are going to have to live and potentially send your children to school in the area.

Skipping Pre-Approval

The pre-approval is a good-faith estimate from the bank telling you how much they expect to be able to loan to you for your purchase. Individual sellers should always obtain pre-approval. This will help you to know how much money you can spend on the house. If you make an offer on a house that you cannot afford you may be liable for the whole cost or steep fees getting out of the house.

Trying To Beat the Bubble

While there is money to be made off of real estate, trying to time your purchase and sale with the burst and rise of a bubble is the worst way to go about it. In the first case, bubbles don’t really “burst.” It is far more accurate to say that bubbles slowly deflate. To have a successful business, you must have the view that real estate is a long-term investment strategy, not a get-rich-quick scheme.

Choosing the Wrong Agent

You should research your agent as carefully as you do the property. Before deciding on an agent conduct extensive interviews with agents of all sizes. Examine how many successful transactions there have been for the agent in the last year or six months. Your agent should be smart, empathic, dedicated and experienced. Don’t be afraid to walk away from an agent if you don’t feel that they have your best interests at heart.

Not Improving Your Credit

The time to get your credit in order is before you make a purchase. Pay off or settle old debts to get your credit score moving upward again. Make sure that you are making all bill payments regularly and on time. To get any kind of a loan you will need a credit score of at least 600, though a credit score of 720 or more will make it far more likely that you will be able to get the type of home that you are looking for.

Going it Alone

Particularly if you are entering the real estate market as an investor, you should assemble a team of professionals to help you out. You will need, at the very least, an appraiser, a lawyer for closing, a home inspector, an appraiser , an agent and a real estate agent. If you are a commercial investor in the residential market, you will also need contacts with people like painters, roofers and general maintenance men.


It’s one of the most basic rules of business -- never pay more than you need to. Make sure that you have a thorough analysis of the purchase before you sign on the dotted line. Include the profit margin that you want to make as a part of your costs.

Moving In to the Market

Beware of common pitfalls in the residential real estate market. This will help you in a number of ways, such as making sure that you do not buy the right property for your family or that you get the maximum amount of return on your investment possible. Especially when the real estate market is dicey, it is important to do your research and avoid traps that others have fallen into countless times.