You are bound to make mistakes. Everyone will— even a professional, long-term real estate investor. Mistakes make us learn, and that’s part of the growth process. You have to understand though; it does become a problem if you continue to repeat the same mistakes again and again. Maybe you are lucky and haven’t made any big slips yet. That’s great, but I still want to give you a heads up. Here are a few of the dumbest mistakes you can ever make as a real estate investor, and hopefully you can avoid making them yourself.
There is advice circling around online that you need to always achieve the best deal as a flipper or wholesaler. This type of talk is fair; to an extent. In order to do well in this industry, you will need to find a deal to achieve a quick profit. The point is, you don’t want to overpay for an investment. If your mortgage is so high, you might have a hard time making payments and earning any sort of return. Take your time, so you learn how to find the best deals as a buy and hold investor. You might be able to mimic what some of the flippers and wholesalers are doing and create some cash flow on your investment.
Hope Of Over Appreciation
A big no-no that investors make is purchasing a property with very little cash flow. They might do this because they have high hopes that the property will appreciate in value, but these hopes are not grounded in fact. Doing this is a very risk move. You don’t know how the market is going to fluctuate and there is no way to predict the changes. I strongly suggest to never purchase a property if your only potential profit point is appreciation.
Often, the best option is to obtain a property at below market value. This way, you can improve the property and add value to it. By purchasing a property that already has a cash flow in the green, you set yourself up to take home income sooner rather than (possibly) never. If you are investing for cashflow gains, don’t put so much weight on the home’s value. If the home decreases in value, you don’t have to worry so much because the cash flow is still coming in. If you are a real estate investor who is “in it” for the long-term potential, which you should be, you have little to worry about.
Not Taking Land-lording Seriously (AKA not treating it as a business)
Would you be surprised if I told you land-lording is a business? You have to keep your assets performing and to do this, you need to “perform.” Maintain the property, keep tenant relations positive, and continue to pay attention to finances. Land-lording is not a simple game of handshake agreements or emotion based choices, remember that— in the long run— how assertive you are makes a difference.