6 Worst Mistakes by First Time Real Estate Investors
Real estate investing is a time tested way of building wealth with efficient planning and effective execution of long term strategy. While it is lucrative it can also be very demanding and costly when mistakes are made.
Remember that the real estate industry is highly competitive and you should know this in advance. It can be extremely difficult for someone new, so having a mentor, knowing someone who has been there or someone with tons of experience to help you get started — will make a big difference. Having said that, we’ve have narrowed down the mistakes investors have made to the 6 worst. Avoid these, so you can produce the best results with the least stress.
1. No Plan of Action
One vital aspect of real estate investment success is planning. The worst mistake you can make is buying a property just because you think it’s a good deal to you and then plan later. There should be a vision and complete written plan including the process, the benefits and the actions you will need to take to achieve the goals.
Key things to keep in mind
• Investment Strategy
Many investors think of the transaction first, before considering their strategy. Falling in love with a property, without calculating the numbers and having a clear plan on what to do, can be a very expensive mistake.
2. Expecting to Get Rich Quick
Don’t fall into the trap of looking for shortcuts to get rich. Real estate can help you build wealth, but it takes time. Making hasty, impatient decisions will usually cost you money. On the other hand, making calculated decisions will help you make more money.
3. Doing it ALL Yourself
If you’ve been doing your research by now you have already surmised that a real estate investor has a whole lot of things to take care of. Research on the area, studying the competition, market analysis, building a network, how to manage properties and the list goes on. You shouldn’t expect to take care of all of these on your own. However, a viable option would be creating a team to work with.
A team that will work for the mutual interest of your business and helps it grow. Investing in a good team is one of the best investments for your business.
4. Overpaying for Properties
This mistake happens when you skip your analysis and run before you learn how to walk. Don’t do it! Ask any seasoned investor and they will tell you something along the lines of, “you make your money when you buy a property.” Which means finding the right property and getting it for a good price that allows you to make a profit. So, do your research, analyze properties before buying them and don’t overpay.
5. Thinking Small
There is a popular saying “You get what you think”. So, think BIG and succeed more. To do so, you can increase the size of your deals or increase your volume of deals. A business plan with achievable milestones clearly defines what you want to achieve with your business and how you’re going to execute them.
6. Only Having One Exit Strategy
A lot of new real estate investors have one exit strategy for their acquisitions, where a seasoned investor will usually have at least two. So, what happens if the original exit plan for an acquisition doesn’t play out as planned?
That’s why having multiple exit strategies is important, so one bad deal doesn’t close you down. Your 2nd or 3rd options may not generate a profit, but they may minimize your losses.
So, take some time to review these mistakes and review your current plans to make sure you avoid them. Just don’t fall into the trap of “analysis paralysis” and do nothing!