by Starla Ross

Created on: October 21, 2008   Last Updated: October 22, 2008

There is a learning curve in every profession, and real estate investing is no exception. As with any new career, there will be highs and lows, but even new investors can succeed in the real estate game.

New investors can save themselves much headache if they avoid the pitfalls newbies sometimes make.

NEWBIE MISTAKE #1: NOT KNOWING THE REAL ESTATE MARKET

One of the cardinal rules of real estate investing is location, location, location. And for good reason. The location of your property will dictate its potential growth and how easily you will be able to sell it in the future.

Know the prices in the neighborhood where you want to purchase. Run comparable listings and see what has sold in the area within the last few months, and for how much. Then compare those with your property. Are you purchase at or below market value? Or is your property the highest-priced property in a ten-block radius?

Check the tax auditor for the county where you want to purchase. Most county tax auditors now list information online, and you should be able to locate when the property last sold, who currently owns it, and how much they paid for the property at that time. (If the information is not yet online, it is available at your county offices - most often the courthouse). Is the seller's price in line with the market and how much work he's put into the property ? If he purchased it one year ago for $150,000 and is now trying to sell it for $275,000, is that sales price realistic for your market?

If the tax records show that the property has been sold numerous times over the last 10 to 15 years, you will want to do a little more research in that area and find out WHY there has been such a large turnover for that property.

Don't forget to check the yearly taxes due for your property while you're doing your research. Taxes can vary greatly by neighborhood, and you'll want to know that amount when making your decision to purchase.

NEWBIE MISTAKE #2: NOT LOOKING FOR PROPERTIES WITH BOTH INCOME AND GROWTH POTENTIAL

If you're into purchasing a rental property, consider both income and potential for equity growth in the property.

A standard formula for landlords is the 1% rule. With the ideal property, you should be able to receive 1% of your purchase price each month in rent. In other words, if you're going to purchase a property for $50,000, you should be able to rent the place for at least $500 per month. If you purchase a place for $200,000, you should be able to receive at least $2000 per month

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