One of the biggest mistakes novice real estate investors make is trying to do everything themselves instead of hiring an agency to handle it for them. Let’s take the area of residential real estate as an example.
Driving around looking for property might be fun, but it’s also time-consuming and it takes away your ability to use your energy toward more income producing activities. Likewise, showing the house, doing paperwork and other routine management issues steal away precious time and resources from your daily life.
Even worse are those novice investors who think they will save a little money by doing small repairs, cleaning or maintenance themselves. While Uncle Sam does allow you to deduct reasonable costs and repairs, many investors are surprised to learn they are not allowed to charge for their own time. Hiring a property manager to show the house, take care of administrative concerns, perform inspections, oversee repairs and collect rent is a great way to save time and maintain full tax deductions.
Many landlords and residential real estate investors decide to make the tenant responsible for small repairs under a specified amount. This is not only a potential liability, but it is almost always a sure way to create a situation where the tenant either attempts to perform a repair on their own or simply ignores the problem until it has become a bigger problem. Either way, it will cost you more in the long run! Instead, work with a reputable property manager or full service real estate agency to save both time and money while taking advantage of the full tax deductions available.