Top 10 Mistakes of Real Estate Investors
Hey girls! Let's talk about Real Estate Investing.
It is like a game of Monopoly. If only it were so simple that one could simply flip over the Park Place card and receive money from the bank for a mortgage. Mistakes will be made. How you learn from those mistakes and press on will determine your success. Here are some of the common mistakes in no particular order:
1. Not Getting Educated
Real estate investing has a learning curve. The more that you learn, the less mistakes that you will make. I have been doing it over 12 years now and I still learn something new everyday. Laws are constantly changing daily, even hourly. Read books, take classes, ask questions, get a mentor, get advice from experts.
2. Not Getting Pre-Approved
Unless you are getting owner financing – you must have cash or credit or find someone to partner with who does. Do not be scared to ask the banks for financing.
When rehabbing – you will go over your budget. I GUARANTEE IT! Everyone does it. Always factor in an extra percentage for repair costs above the amount that you estimate for repairs. You will still go over. I guarantee it
Location is a key factor in determining a good deal. Some neighborhoods make better “flip neighborhoods” while others make better “rental neighborhoods.” Invest where the people and the jobs are, not in some ghost town with no one around.
5. Using a Team That Doesn’t Have Investment Experience
…Or not using a team at all! Never Ever use a real estate agent that does not have investment experience themself. It is a whole different ballgame. Way too often I see flippers list their property for sale with agents that do not understand the game. These agents overprice the properties because they comp mult-units to single family homes. As a result, the property sits for months causing the investor time and money. The same goes for the rest of your team – your accountant, attorney, etc. should all be investors.
Always get estimates from at least 3 different contractors and let them compete for the job. Always Always get all estimates in writing. It sounds so simple right? Yet so many people end up in court each year due to price discrepancies and not getting the bid in writing.
7. Buying/Selling Based on Emotions, Not Facts
I think that Armando Montelongo said it best – You fall in love with the deal, not with the house. If the numbers work, then it is a good deal. Investing is a numbers game. Remember, that you are not going to be living in the house. Just because you like a red bedroom does not mean that your potential buyer will like it. Do not put granite counters in a house if the market does not command it. In other words, if all the other houses selling in the neighborhood have Corian countertops, it does not make sense to use granite. You will not get the return on your investment.
8. Taking Things Personally
This isn’t personal, this is business. Tenants will tell you every excuse as to why their rent is late. Learn to say, “I’m sorry that you are having problems, but your rent is still due.” Stick to your guns and follow the lease to a T. If you are supposed to mail a late notice 5 days after the rent is late, then do it! Evictions suck. They are not fun for either the landlord or the tenant. You will evict some really nice people, that just don’t pay their rent on time.
9. Not Having an Exit Strategy
After you buy the property – what do you plan to do with it? There are over 112 different ways to invest in real estate. You could rent it, flip it, wholesale it, lease option it, do a land contract, etc. If you plan to buy and hold or roll your gains over using a 1031 exchange – then you need some type of estate planning to protect your wealth.
10. Making Excuses
…and never getting into the game at all because of fear. Often people will say, “I’m too young, too old, I don’t have enough money.” I hear, “My best friend’s sister’s husband’s brother tried it once…” That’s BS! There is never a better time to start than now. It is the best time in U.S. history to buy! Mortgage rates are low and property is cheap.