Wrong Ways to Invest in Real Estate

With real estate showing signs of a rebound, investing in real property becomes more popular.

Like any other endeavor, there's a right way and a wrong way to go about it.

Here's a look at seven lethal missteps investors often take:

1. Planning as you go. Andy Heller, co-author of "Buy Even Lower: The Regular People's Guide to Real Estate Riches," says the lack of a plan is the biggest mistake he sees new investors make. Buying a house and then figuring out what to do with it is working backward, Heller says. Doug Crowe, a Chicago-based real estate investor, says the best way to solve the problem is to have lots of activity and make offers on multiple properties. You must also have multiple exit strategies. Some investors buy a property with the intention of selling it or renting it out. What if it doesn't sell? What if the rental market stalls? If Plan A is to rehab the house and then sell it, Plan B could be to offer it as a lease-purchase. Plan C might be to rent it out and Plan D could involve selling to another investor at a below-market price.

2. Thinking "get rich quick." That kind of thinking is fueled by "self-appointed gurus on infomercials who make it sound easy to get rich in real estate," says Eric Tyson, co-author of "Real Estate Investing for Dummies." "These gurus don't talk about all that hard work. You have to be smart, you have to be willing to work, and you have to understand your risk tolerance."

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