Real Estate Investing Mistakes You Want to Avoid
When investing in real estate there are many moving elements; therefore, many costly mistakes can be made. In fact, even experienced, savvy investors still make mistakes or have had to overcome challenges in their investing careers. The good news is that with some education you can recognize, avoid, learn and move forward from these potential disasters.
7 Key Mistakes Rookie Real Estate Investors Make.
- Never Speculate – Most new investors follow the herd, (this is the blind leading the blind). Do not listen to the media and buy hoping the property will appreciate or some new development will come along and increase value. This is as much of a gamble as hand picking stocks or going to the Casino…..Trust me I have spent many years in the casino industry as well as the real estate industry. Always buy below market properties that cash flow. Be sure to do your homework and buy in economically strong areas.
- Don’t Buy at Market Value – Beginners almost always buy property straight off the MLS for market value. You can find deals in any market and there are always distressed properties. You need to shop around; there are many sources to find great deals. Be like Wayne Gretzky and cherry pick (Hockey reference for the Gretzky fansJ) from distressed properties at 75% or less of market value.
- Do not fall in love with a deal or get your emotions involved – Save LOVE for your relationships! There is no room for emotion when it comes to real estate investing. Many beginners are guilty of this one. Their first few deals they spend minimal time finding a deal. As soon as a prospect is located, they fall in love and do anything to get that property. Emotions drive the decision, instead of making an informed business decision. The key is to get as many prospects that fit the criteria into the pipeline, filter out the duds and buy only the best deals. Always ask yourself….” will this investment bring me closer to my desired goals?”…..If the answer is YES …move forward.
- Rookies put too much down or too much of their own money in – Real estate is an “OPM” or Other People’s Money industry. You should minimize how much of your own money is in a deal. And always make sure you have plenty of reserves to handle any repairs, renovations, or surprises that may arise. Factor those costs into your purchase before making a final decision.
- No real exit strategy – To minimize risk, it is imperative to have multiple exit strategies. In real estate there are many exit strategies; depending on your goal you should be well educated on them all. You do not want to ever fall behind in payments and lose the property and your credit. Instead, buy below market properties that cash flow. That way you can sell retail, wholesale, lease option, seller finance, refinance, even rent and hold: just to name a few.
- Buy in Warzones – Everyone wants to buy property at a deep discount. In many markets you can find huge discounts in many areas. Do your due diligence. Buying a property for 50K worth 90K sounds like a great deal, but not if the property is vandalized multiple times during repairs, surrounded by 20 other “power of sale” properties and there is next to zero interest from renters or buyers due to the location. Make sure there is strong demand from renters and/or ownership in the area before you invest your hard earned money!
- Most rookies never consult an expert or build a team – Many people are do-it-yourselfers (myself included. BUT I learnt my lesson) and cannot fathom the idea of another person giving them advice or handling tasks. Real estate can be very passive if you build a solid team and many experts are more than willing to give you advice that could significantly impact your success and experience as a beginner. Do not be like me and learn these lessons the hard way!!! You will pay either way…..either for education or the much more expensive way…..from the school of hard knocks!!!
Many professional investors make real estate investing sound so easy……News flash, it is NOT! Real estate investing is not a “get rich quick” investment. To be successful you must be willing to commit your time and some hard work!
Many rookie investors make one, even all of the above mistakes and have a miserable first investing experience. Whether you are a rookie just beginning your new adventure or an expert, it is always important to get as many educated opinions as possible. They will make you aware of many potential mistakes, challenges, and red flags. Always do extremely thorough due diligence. If you are willing to put in some work, get educated, and build a great team. Then you will be well on your way to a successful real estate investment career.
So…Are you ready and willing to do what it takes to be successful? We will see. Leave a comment below