Investing in real estate is one of the best ways to build wealth, but it comes with its own set of challenges. Whether you are new to investing or looking to expand your portfolio, knowing what mistakes to avoid can save you time, money, and stress. As a real estate investor myself, I have seen these mistakes firsthand. Today, I am sharing the top three mistakes that investors make and how you can avoid them to maximize your success.

Ignoring Rental Restrictions

One of the most critical mistakes investors make is not checking rental restrictions before purchasing a property. Whether you plan to use the property as a long-term or short-term rental, failing to understand the rules and regulations can leave you with an asset you cannot rent out.

What to Watch For:

• Condo HOA Rules: Many condominium associations have strict rental policies, requiring minimum lease terms (e.g., 30 days, 6 months, or 12 months). Some even require HOA board approval before leasing your unit.

• Townhome Restrictions: Some townhome communities impose restrictions requiring owners to live in the property for a specific period before renting it out.

• City & Zoning Regulations: Some cities have zoning laws that limit short-term rentals (e.g., Airbnb) or impose additional taxes and licensing requirements.

How to Avoid This Mistake:

• Always read the HOA bylaws and CC&Rs before purchasing a condo or townhome.

• Verify city and county rental ordinances to ensure your investment aligns with legal requirements.

• Work with a knowledgeable real estate agent who understands rental-friendly properties and can guide you to the best options.

Ignoring rental restrictions can turn your investment into a costly mistake, so always do your due diligence before buying.

Not Researching the Neighborhood

Investors often focus on the property itself but forget that location plays a major role in rental success. Choosing the wrong neighborhood for your target market can result in longer vacancies and lower rental income.

Key Neighborhood Factors to Consider:

• Demographics: Who are your target renters? Young professionals, families, or students? Each group has different needs.

• Walkability & Transit: Is the property near public transportation, shopping centers, and entertainment areas?

• Rental Demand: How long do rental properties stay on the market in the area? What are the average rental rates?

• School Districts: If you plan to rent to families, check the quality of local schools.

How to Avoid This Mistake:

• Study rental market data using online platforms like Zillow, Rentometer, or local MLS data.

• Drive through the neighborhood at different times of the day to observe traffic, noise levels, and general safety.

• Talk to local property managers to gain insights into tenant demand and rent trends.

• Check crime rates and school ratings through online resources like NeighborhoodScout or the local city website.

By understanding the neighborhood, you can make smarter investment decisions that attract the right tenants and maximize your rental income.

Underestimating Monthly Costs

Many investors focus only on the purchase price and expected rental income, forgetting about ongoing monthly expenses. These costs can quickly add up and eat into your profits if not accounted for properly.

Hidden Costs to Factor In:

• Property Management Fees: If you are not managing the property yourself, expect to pay 8-12% for long-term rentals and 20-25% for short-term rentals.

• Maintenance & Repairs: Budget at least 1-2% of the property’s value annually for maintenance.

• HOA Fees: Condos and townhomes often come with monthly HOA dues that can increase over time.

• Insurance & Taxes: Ensure you account for property insurance, liability coverage, and property tax increases.

• Vacancy Rates: Even the best rentals experience turnover, so budget for 1-2 months of vacancy per year.

• Utilities: If you include utilities (electricity, water, internet) in the rent, make sure to estimate the monthly cost accurately.

How to Avoid This Mistake:

• Create a detailed pro forma to calculate cash flow and net operating income.

• Use a conservative rental estimate when analyzing deals.

• Set aside an emergency fund to cover unexpected repairs and vacancies.

By properly budgeting for monthly expenses, you ensure that your investment remains profitable in the long run.

The 3 Common Mistakes to Avoid

1. Ignoring Rental Restrictions – Always check HOA rules, CC&Rs, and city zoning laws before purchasing.

2. Not Researching the Neighborhood – Understand rental demand, demographics, and market trends to attract the right tenants.

3. Underestimating Monthly Costs – Factor in all expenses, including property management, maintenance, taxes, and HOA fees.

Final Thoughts & Next Steps

Real estate investing is a powerful tool for building wealth, but avoiding these common mistakes is key to success. Take the time to research thoroughly, plan strategically, and work with an experienced real estate agent who understands investment properties.

If you are considering investing in Seattle, I would love to help. Whether you are 6 months or 12 months away from purchasing your first investment property, now is the time to start planning.