Interested in real estate investing? Or, perhaps you’re already an investor and wondering why you’re struggling? Following are 10 Common Real Estate Investing Mistakes to avoid.
- Failing to learn the basics.
When starting anything new, including real estate investing, there are simple ways to learn the basics. You can go to the local library or bookstore, join the local Real Estate Investors Association (REIA), spend money on boot camps and educational seminars, study online on your own, purchase a HomeVestors Franchise! No matter how you go about it, there’s a lot of opportunity to pick up the fundamentals of real estate investing. The most successful investors study, pay for, and establish a good foundation from which to grow.
- No plan.
I often speak with investors who believe real estate investing is a solid way to financially secure their future, but are not sure what they’re looking for or what they want to do with real estate. They’re not sure how to get started, with whom to work, what to buy or what strategy they’re going to use. To be successful you must have a plan. Start by deciding on and writing out your goals, then write out how you’re going achieve them.
- Short term vision.
True wealth building requires long-term investing. You can’t create real wealth by getting in when you feel good about it and getting out when things get rough. The real estate market always fluctuates – up and down – so real estate investing for wealth happens over time. Renovating and re-selling brings quick cash today, but wealth requires owing properties long term to generate passive income forever. And nothing beats allowing someone else to pay off your mortgage. Eventually, when your houses are paid off and that full rent is your cash flow, you’ll find that you’ve created amazing wealth for both you and your heirs.
- “Get Rich Quick”
Refer back to mistake number three. Real estate investing is not a “get rich quick” venture. “Fix and flip” is only a small part of the strategy to grow your investment portfolio. Tax write offs from your hold properties can be used to offset the profits from your flips. Without that, you’ll pay a third or more of your profits to Uncle Sam as short term capital gains. Tax benefits on your holds (rental properties) greatly increase your wealth building over time. That’s not get-rich-quick, it’s building forever wealth over time.
- Not treating your investing as a business.
This is not a hobby. Yes, investing can be fun, but it’s not sustainable unless you’re treating it like a business. You need to be structured, organized, serious. There are a lot of moving parts with any property purchase-hold-renovation-sale and a lot of money can be lost quickly. To be successful, you must be committed and focused.
- Not having an intentional strategy.
If you focus on one exit strategy, you’ll learn to make that process successful and you won’t get distracted by default options. The clearer your exit strategy, the better your purchase will be for that exit strategy. Focus on the result you want from a property and buy right to make it happen.
- Lack of cash.
Lack of cash will really slow you down. And banks are not fond of lending for speculation. A great source of funds, and something you absolutely need, is investment partners with cash. Cash doesn’t always mean a pile of green by the way. It’s money in CD’s, money markets, 401k’s or IRA’s; it’s in areas that sometimes you don’t think about. HomeVestors, by the way, has a wonderful lending program exclusively for franchisees. I’m happy to discuss their options with you.
- Not understanding renovation costs.
Two main renovating mistakes: First – grossly underestimating the cost of a rehab. Over time, you’ll be able to walk into a house and estimate repair costs. You’ll also learn neighborhoods, know exit strategies, and know your personal plan from the time you walk into a property. But this takes time to learn. Second – not sticking to a budget. Perhaps you start with a fairly accurate budget. However once you get into it, you become personally attached and, next thing you know, what could be a laminate becomes hard-surface, planned vinyl flooring becomes tile, you put in updated fixtures where you don’t need to, brand new appliances when they aren’t needed. Little things add up to big dollars and, pretty soon, you’ve blown the budget. What’s necessary is someone with experience to bounce ideas off, someone to hold you accountable and keep you on track. HomeVestors provides that along with exclusive software that takes your job details and generates needed supply lists and costs so you’re informed before you purchase.
- Waiting too long to get started.
We knew a 25 year old who owned seven properties. His exit strategy was to own twenty-five properties by age 40 and to have those properties paid off. He planned to average $1,000-$1200 per property per month. Pure profit. Minus a few expenses, he’d clear a great return at a very young age. Moral is, don’t wait to get started. If you don’t buy now, in five years you’ll be sorry you waited.
- Going it alone.
To be successful in any businesses, you need a mentor. Real estate is no different. A mentor is someone you work with, someone you trust, someone who agrees with your business philosophy. Having a good mentor to lead and guide you will pay off in big profits. There’s no need to learn on your own. Bringing in someone with more expertise will prevent you from making big mistakes. I guarantee you will pay for your education one way or another – you either pay coaches or you pay with mistakes. Going it alone can be very, very costly. Surround yourself with like-minded individuals who can lead you down the path to success.
HomeVestors provides local Development Agents to all franchisees from day one. Your DA will help teach, guide, and keep you on track. These experienced mentors are there for you 24/7 at no additional charge.
I see these 10 Common Real Estate Investing Mistakes repeated over and over. I hope you’ll learn from the mistakes of others and create a very successful investing business of your own.
Please leave your questions and comments below. I look forward to hearing from you.