There are a lot of mistakes
that can be made in Real Estate. In fact, many savvy investors still make
mistakes or have overcome huge mistakes in their investing careers. The keys
are to recognize, avoid, learn and move forward from these potential pitfalls.
Here are 7 Key Mistakes Beginner Real Estate Investors Make.
Speculate – Most new investors follow the herd,
listen to the media and buy with the hope the property will appreciate. This is
as much of a gamble as hand picking stocks or going to the Casino. Buy below
market properties that cash flow.
Buy at Market Value – Beginners almost always buy
property straight off the MLS for market value. You can find deals in any
market and there are always distressed properties. Cherry pick from distressed
properties at 70% or less of market value.
Fall in love with a deal and get your emotions involved – Many
beginners are guilty of this one. Their first few deals they spend minimal time
finding a deal. As soon as a prospect is located, they fall in love and do
anything to get that property. Emotions drive the decision, instead of making
an informed business decision. Key is to get as many prospects that fit the
criteria into the pipeline, filter out the duds and cherry pick only the best
deals.
Put too much down or too much of your own money – Real
estate is an OPM or Other People’s Money industry. You should minimize how much
of your own money is in a deal. And always make sure you have plenty of
reserves to handle any not so pleasant surprises.
Only have one exit strategy – To minimize risk, it
is imperative to have multiple exit strategies. If you cannot flip a property
you can quickly end up upside down, behind in payments and lose the property
and your credit. Instead, buy below market properties that cash flow. That way
you can sell retail, wholesale, lease option, seller finance, refinance, even
rent and hold.
Buy in Warzones – It is wish to buy property
at a deep discount. In today’s market you can find huge discounts in many areas
with the glut of foreclosures. Do your due diligence. Buying a property for 20K
worth 80K sounds like a slam dunk, but not if the property is vandalized
multiple times during repairs, surrounded by 20 other foreclosed properties and
there is next to zero interest from renters or buyers due to the location in or
near a warzone. Make sure there is strong demand from renters and/or ownership
in the area.
Do not
consult an expert or build a team – Many people are
do-it-yourselfers and cannot fathom the idea of another person giving them
advice or handling tasks. Real estate can be very passive if you build a solid
team and many experts are more than willing to give you advice that could
significantly impact your success and experience as a beginner.
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