If you’re an investor, you want to avoid the top 5 real estate investment mistakes at all costs. Not only do they mean headaches for you, but they also affect your pocketbook in a big way. Well, here on Wealth Wednesday, we have just the information you need to stay away from such negative fall out thanks to our friends over at earlytorise.com.
Let me add that I’ve been a real estate investor for over 30 years. And to be honest, I’ve made many if not all of these 5 mistakes talked about below. See if you’ve guilty of these yourself.
Top 5 Real Estate Investment Mistakes
“…the vast majority of deals that don’t work as planned are the result of mistakes on the part of the investor. Let’s look at what I’ve seen as consistent mistakes made usually by new investors, but not always.”
-Dean Graziosi, earlytorise.com
Mistake # 5: Putting too much trust in new contractor relationships. This mistake is more common with new investors, and it can be devastating, putting some out of business on their very first deal. It doesn’t just apply to fix & flip either. You could be buying a rental property and doing your own rehab.
Develop good contracts, be clear in specifications and scope of work, don’t pay until work is delivered, and get lien releases.
Mistake # 4: Taking a short-term view of a long-term investment. Some investors do everything right, but they still end up in trouble with a rental property simply by not taking a long term planning view. Buying right, at a discount to current value, is a good start. But, if you don’t have a pretty good plan for when you will sell the property and what it will cost to sell, you could end up losing a chunk of the cash flow you enjoyed in a sale that loses money.
Mistake # 3: Working only with real estate agents for rental homes. What I’m talking about here is always working with real estate agents to buy a home as a rental investment. You can do some negotiating with sellers, but the commissions are in the deal and generally you’re buying at or close to the retail market value. The best rental property deals are purchased at a discount to current value, locking in some profit from the first day of ownership. Don’t NOT work with real estate agents, but do open up other avenues to buy at below retail pricing.
Mistake # 2: Getting the numbers wrong. You must do your research and due diligence to identify your costs and risk versus reward. Some apply to all strategies and some only to rental property investment. There is a whole list of valuation and profit calculations involved in real estate investing, and you need to determine which are appropriate for your investing, learn them and use them properly.
Mistake # 1: Not doing it! It can surprise you how many naysayers you’ll find in your life if you announce you’re about to become a real estate investor. Family and friends, some well-meaning and concerned about your welfare, will come up with all kinds of doubts and concerns.
IGNORE THEM. You can do this. Avoid the mistakes I’ve shared here, learn how to do it, and your naysayers will come to you in the future asking if they can get involved.
You can read all of Dean Graziosi’s post here. Let us know what you think. Are you a real estate investor? Have you made any of these mistakes before? Share with your fellow boomer males below.
Do well.
