Threw a couple tips on my Instagram story about 10 deadly mistakes made when investing in real estate. Got a great suggestion from someone I follow to make it into a blog post, so why not?! If you caught the Instagram story and thought it was helpful then you’ll definitely want to dive into this as I’ll dive deeper into explanations.
Mistake #1 – Never getting started
I wish this didn’t have to be said but for some this is the biggest hurdle to accomplishing goals. Stemming from nervousness, self-doubt, feeling like you don’t know enough, or that it isn’t the right time. Realize that the common denominator in achieving anything is the right mindset! Go ahead, hype yourself up, you the shit! Click To Tweet Even if you can’t buy right at this moment for whatever reason, there is always a plan of action that can be taken such as networking and learning the ropes. Start by reading (The Millionaire Real Estate Investor – Gary Keller) or listening to real estate podcasts (BiggerPockets.)
Mistake #2 – Analysis paralysis
Be self-aware, analysis paralysis is a real thing, you’ll never have all the answers (I surely don’t and I’ve been buying real estate for 7 years.) The best teacher is experience, first learn from other’s experience via conversation or books but then you’ll need to get out there and learn from your own experiences. Note: My favorite book on obtaining a great mindset is As A (Wo)Man Thinketh – James Allen. It’s written in old English but a great read!
Mistake #3 – Lack of focus
A home is probably the most expensive thing you will ever buy. It’s definitely not rocket science but whether you plan to buy one or scale to 50 rental units, you’ll need to focus on the task at hand. Whether it’s sticking to a savings budget, reading a certain amount of pages, or being sure to follow up/ask questions. Confession: I’m lazy as hell. One of the main reasons I got into real estate was to make passive income so I could continue living my best lazy life! Real estate investing done the right way is like the Set It and Forget It infomercials. However, I was focused to obtain my goals so that I could get to where I am now and you too will need to do the same. Favorite book for staying focused: The One Thing – Gary Keller.
Mistake #4 – Trusting and not verifying
No successful person has gotten where they are by not working with others. You can’t do everything yourself and if you try it’ll take a really long time to get to the finish line. Leverage your resources but be sure to check the information given or work done. That goes for mortgage lenders, inspectors, tenants, and business partners. Not everyone will have the same work ethic or attention to detail and could miss things on accident. Of course be respectful when doing so. Once you get a great relationship going then it’ll take less following up. This is also means being able to communicate your expectations clearly. Favorite book on best ways to work with others: The 4-Hour Workweek – Tim Ferriss.
Mistake #5 – Misunderstanding the numbers
The old saying “Numbers don’t lie” still holds true. The hard part is understanding what the numbers are telling you. Know the ROI (return on investment) which is the amount of money you are getting in return for the amount of money you put in, APR (annual percentage rate) the rate you are being charged to borrow money, SFH (single family home) this is your typical unattached home for one family with a yard, BRRRR strategy (buy, rehab, rent, refinance, repeat) is one of the best methods when investing, PMI (private mortgage insurance) is a safety net for your mortgage company in case you default on your loan and is usually mandatory when you put less than 20% as a down payment.
Mistake #6 – Straying from budget
Seems easy enough, right? I’ve seen a few investors overspend or make their home too nice for the neighborhood. Now if you are going to live there for some time then no problem but when it comes to flipping a home you don’t want to have the nicest house on the block. Realize that you are also buying/selling the neighborhood when it comes to real estate. This causes homes to sit on the market longer than anticipated because they “over rehabbed” their home. Find a handyman or contractor that will be will ing to walk through a potential home with you so they can give you a quote on all the things you’d like to change. Favorite book on this is Jay Scott’s The Book on Flipping Houses. He also has another titled The Book on Estimating Rehab Costs.
Mistake #7 – No diversity
Areas that have a bustling and diverse representation do well when it comes to rentals. Cities like Detroit have faltered when certain economic instances occur like the car industry crash or AirBnBs on Jersey Shore that have not yielded any income due to the COVID-19 pandemic causing beaches and casinos to close. Diverse cities helps to ensure that when sh*t hits the fan you’re covered for the most part.
Mistake #8 – Unknown criteria
One of the worst things you can do is not know what you want, especially when dealing with other people’s time. Buyer’s agents spend a lot of time driving to show property and gas ain’t free and neither is time. There are thousands of homes and there’s no way you can see them all, know what you want so you can narrow down the selection. Top categories to keep in mind are property type: whether you want a single family home, condo, townhouse, or multi-family property; preferred location: this should go deeper than the city such as certain neighborhoods or even zip codes; condition: are you okay with a home that needs a little work?; price range: know how much you want to pay and how much you can afford for a property is definitely key; profitability: how much would you like to make on the flip or rental every month. Other small details help too like square footage, number of bedrooms/bathrooms, and how many stories. Sidenote: 3 bedroom/2 bathroom single family homes with about 1,200 square feet are considered the most popular type of homes on the market. Book recommendation: ABCs of Real Estate Investing by Ken McElroy.
Mistake #9 – Impatience
Opposite of never getting started are those who jump in with only the end goal in mind with no action steps in mind on how to get there. Don’t just focus on the goal but on the action steps needed to get to the goal. Being impatient can lead to mistakes and in real estate mistakes can be very costly.
Mistake #10 – Inheriting tenants
One of the upsides of buying real estate is you can purchase what’s called a Turnkey Rental property, this is a property that is already producing income cause there is already a tenant in place. One of the downsides of buying real estate is buying a property with a tenant already inside. So depending on the situation Turnkey could be good or bad, depending on if that tenant is actually paying and on time. Owners or residential income properties with a tenant typically only sell because the current tenant is a headache. Either always breaking something, not paying on time, or not paying the full amount. To save yourself the trouble be sure to ask for the rent roll or bank statements for proof that the tenant is in good standing and not late or unpaid rents.
Mistake #11 – Believing that all agents are good agents
I’m not here to ruffle any feathers but I’m probably going to ruffle some feathers… Your real estate agent needs to own property, preferably multiple. I advise you not to take advice on buying a home from someone who has NEVER bought a home. Something about that just doesn’t sit right with me. This is especially true for folks who looking to buy an investment property. Your agent should also be able to help you determine what would make a great investment. Be sure to use resources like
None of these one mistakes can break your real estate investing but continuous or a combination of mistakes can but don’t feel afraid to get started! Learn what you need to know and take the first step. Feel free to send me a message with any questions!