Seven Mistakes Real Estate Investors Make

What are the most common mistakes that real estate investors are making today?

How can you avoid them?

A survey of real estate and investment professionals by Bankrate.com confirms the usual line up of cringe-worthy blunders that new real estate investors keep making. Here’s what to avoid if you actually want to make money in real estate, and the smarter moves to make to ensure your success…

1. Do First, Plan Later

Most real estate pros, agents, and real estate gurus just want you to take action now. There is value in action. Obviously you aren’t going to get anywhere without taking action. But you’ve got to be going in the right direction with calculated action. Unless you have a clear picture of your end goal, a vision of the journey, and what it’s going to take to get there, you really don’t know the best steps to take. This doesn’t have to be a lengthy process, but you do need some form of a plan. It can be one sheet of paper, but have something. Then you’ll know what strategy and exit is the best fit, and what types of properties to look for, which strategy or method to use, and which niche is better suited for your financial situation.

2. Dreams of Getting Rich Quick

Yes, by many measures real estate can help individuals get rich and build wealth faster than many other industry. But the get rich quick mindset can absolutely bankrupt you. It can lead to devastating debt, taking shortcuts, and serious disappointment. It’s far better to go in with a long term mindset and game plan.

3. The Lone Ranger Mentality

When was the last time you saw a single player NFL team win the Super Bowl, or a one person relay race? It doesn’t happen right? Well real estate is a people business, and a team sport too. It takes a team of real estate professionals with teams to get a single real estate transaction closed. It takes a construction team to rehab a house. And not only does working with others make real estate investing easier and more profitable, it also makes the journey a lot more fun too.

4. Skipping School

You don’t need a college degree to get into real estate. However, you do need to know more than watching a few episodes of house flipping shows on TV. At least if you want to actually make money. You can learn and earn by investing into a real estate mentor or coach. You can invest in courses and read books. Learn and discover additional exit strategies, and how to do the math. Whatever you do, make sure you do invest in learning. It’s the best investment you can make, and it will pay off when applied.

5. Overpaying for Property

This is becoming an increasing problem as values rise. If you overpay for a property you can get stuck, and end up losing a lot more. Don’t gamble on appreciation. Make sure the numbers work now. Yes, there are overpriced properties out there, unreasonable sellers, emotional real estate investors buying, bidding and there is competition. But there are also virgin wholesale deals out there if you know where to look.

6. Neglecting the Due Diligence Process

Reality TV shows can make it seem exciting and easy to buy properties sight unseen, on the spot. And there are some agents and sellers out there that will want you to sign contracts without contingencies or clauses. Sometimes these deals can lead to massive profits. But unless you’ve done your due diligence you are really just gambling. You are gambling on the value, on the costs to repair, the rental potential and the length of time to make the property retail ready if you haven’t done your research.

7. Miscalculating Cash Flow

Failing to accurately assess cash flow is dangerous, but all too common. If you wind up in a negative cash flow situation you are going to be taking money out of your pocket every month to cover the property expenses and other business expenses. Getting it wrong is easy if you haven’t done your due diligence or homework. You don’t just need to know the potential rents or your mortgage payment. You’ve got to know insurance costs, property taxes, vacancy rates, budget for a capital reserves account and more. If you are not sure have another more experienced real estate investor, mentor, coach or accountant look over your numbers to see what you might be missing.

I”ll See you at the closing table,

Marcel Umphery the “R.E.I. Successmaker”