I think at this point I have made almost every conceivable mistake in real estate. I’m not kidding. I did not have a mentor in this. I figured it all out on my own. This not only cost me time, it cost me money…tons of it. Tens of millions of dollars to be exact!
I have purchased or have been involved in every type of real estate transaction possible. Everything from single family flips, ground up new construction, development, rentals, hotels, retail, commercial, and large scale multifamily residential. You learn a lot when you are submersed in this array of deals. You learn what works, but more importantly, what doesn’t work.
Below are some of the mistakes all real estate investors need to avoid whether you are a beginner or seasoned vet.
Buying Too Small
You can’t make reliable money on small deals. To buy and hold a single family home can be a disaster waiting to happen. Sure, you might get a good tenant to rent for a year or so, but once that tenant leaves, you are scrambling to fill that vacancy before you have to dip into your pocket to cover your carry costs for the property. The only way owning single family rentals works is on scale with proper management in place.
Neglecting the Screening Process
Not properly screening tenants will cause you to lose tons of Money. Not only will you lose your rental income each month, but you will incur court, legal, and repair costs that you will not ever collect on. Take this process seriously or leave it to professional rental agents.
Taking on To Much Debt
At some point in the economy, too much debt will become unbearable for the property to support itself and will need you to supplement it personally to keep it afloat or risk losing it to foreclosure. I learned this early on and was able to pivot and make it work. This was the ultimate cause of the 2008 housing collapse. With investment properties, never take on more than 75% debt so that you are covered in all market conditions.
Buying Based on Price
Don’t let the price fool you. When shopping solely on price, you tend to get what you pay for. If it is cheap, it is usually cheap for a reason. In fact, when applying this to real estate, a low price is usually a sign that something is wrong.
Control Your Emotions
Never want a property so badly that you will end up making silly, sloppy, and uninformed decisions in order to get it. Whether it is in the long or short term, you will always pay a price too high. This I 100% guarantee will end badly. You must be disciplined and stick with you objectives.
Use Brokers to Negotiate
They do the negotiating, etc. on your behalf, removing you from that part of the situation. They can ultimately save you a lot of money on the purchase. You set the parameters for the deal and they have no authorization to break them.
Not Looking at Enough Deals
You must constantly fill your pipeline with deals to dig into. The more deals to review not only gives you practice, but more importantly, it gives you more opportunities to make offers and ultimately acquire more properties to add to your portfolio.
Not Knowing the Market
Sales, comps, vacancies, and even insurance rates change from market to market. You must know all the information of the area you are looking in. This includes the purchase price and rent rolls all the way down to the marketing costs if you want to succeed in real estate.
Not Buying
This is the biggest mistake of all. Commit to becoming an intelligent real estate investor and start building your portfolio of properties that will generate passive income for generations.
Don’t try to figure it all out on your own. Avoiding these mistakes and others will give you a huge jump start to a long and successful real estate investing career. Sure, it can be a scary process, surround yourself with a great real estate power team, educate yourself and take my advice, you will be well on your way to amassing a real estate portfolio.
At Real Estate Capital Group, We pride ourselves on our commitment to making the loan process simple for investors. We have over 50 years of real estate investing and lending experience that will help you scale your portfolio fast
I cover the mistakes along with the entire process of becoming a real estate investor in my book. After reading it, I am sure that you will have the confidence to go out there and find some great income producing properties. It's available in digital and print.
Please reach out, we are here to help you grow your portfolio and avoid the headaches that may come up.