Investing in real estate often seems like a safe way to grow capital, but even experienced investors can fall into traps that can destroy years of hard work. The main problem is not the risks themselves, but the unwillingness to foresee them. Here are five fatal mistakes that ruin portfolios and how to avoid them.
The first mistake is lack of diversification. Investing all your money in one property or type of real estate is like playing roulette. For example, an investor who bought three apartments in one residential complex risks losing income if a competing complex appears in the area or the environmental situation worsens. To avoid this, diversify your assets: combine residential, commercial real estate, and logistics centers in different cities.
The second mistake is an emotional approach. Buying a house because of a “picturesque view” or personal sympathy for the architecture, without analyzing market profitability, leads to failures. For example, a client from Odesa bought an old mansion by the sea but could not rent it out due to lack of parking and internet. Instead of emotions, be guided by numbers: study average rental rates, demand in the area, and price growth forecasts.
The third mistake is ignoring hidden costs. Many investors are happy with a low price, forgetting about taxes, repairs, utilities, and HOA fees. For example, renting an apartment for 500 per month may bring only 200 net profit if monthly utility bills are 150 and taxes are 150. Always calculate the total cost of ownership (TCO), including indirect costs.
The fourth mistake is the absence of a reserve fund. Even the most reliable property can become a source of expenses: flooding neighbors, fire, or legal disputes with tenants. An investor from Kyiv lost $15,000 due to unplanned repairs after a tenant damaged plumbing. To avoid a panic sale of assets, create a reserve of 15–20% of the portfolio’s value and insure risks.
The fifth mistake is choosing the wrong timing. Buying at the market peak due to fear of missing out (FOMO) or selling during a temporary price drop destroys profitability. In 2023, housing prices in Kharkiv fell sharply due to oversupply, and investors who bought at the peak sold at a 20% loss. Study long-term trends: demographics, infrastructure development, and economic forecasts for the region.
To fix mistakes already made, start with a portfolio audit. Sell low-liquid assets, such as commercial premises in areas with falling demand. Consult experts: platforms like QUBIT Estate help analyze risks and find promising properties. Additionally, diversify your income: turn part of an apartment into coworking or rent it out via Airbnb during the season.
Investing in real estate is a science, where every decision should be based on data, not intuition. Avoid templates, study the market carefully, and remember: even a crisis is an opportunity to buy a promising asset at a low price. Start small—analyze one of your properties today.
