Those who have ventured into the world of real estate investment have likely been told some obvious advice. Don’t spend too much! Buy in a buyers market! Don’t over invest! Sell immediately!
But there are a few other pieces of advice you might not get. Here are 5 common mistakes every real estate investor should avoid.
- Failing to treat it like a full time business. If you haven’t immediately approached this as a serious venture and are instead looking at is as a hobby or side job, you might be in for a hard time. Real estate investment is a commitment that requires a lot of focus and energy. You want to hire smart when it comes to your contractors; you want to buy smart when it comes to your investments. Recognize that going into this business and making mistakes can mean wrecking your personal savings and investments, so be smart. Think long and hard about what you’re doing, and organize yourself appropriately.
- Not being patient enough. That 90 day flip rule attached to FHA loans isn’t a challenge to accomplish everything inside of three months. Even the process of finding the right property to start on can take months to actually complete. Relax, and breathe. Don’t rush into a property that’s too big of a task for you to complete, or that would be too difficult to ever turn back around on the market. Know your limits and stick to them. Remember that even when things are going smoothly, there are still permits to account for, inspections to schedule, checks to clear, and dates to set for closing.
- Wanting to be the ultimate Do It Yourself-er. “No man is an island.” Or maybe, “No man is the sole contractor on a job.” Even outside the world of the renovation, you don’t want to be your own lawyer, your own attorney, your own accountant, your own lender, or your own agent. Build a support system of people who you trust to complete the work you hand to them, and walk away knowing that the job will get done. It might be satisfying to imagine yourself successfully flipping real estate as a one man job, but in reality you’ll be able to be far more successful if you accept a little help from your friends.
- Not having an exit strategy. Is the only potential outcome you’ve imagined to purchase the property, upgrade it, then immediately sell it? Bad move. There should be at least a Plan B, and ideally a Plan C and D on top of that. In addition to having an exist strategy, you should have a time line for when this plan would be implemented. How long are you giving yourself to get Plan A successfully done? Hold yourself accountable. If it hasn’t happened, then it’s time to move on to the next route.
- Failing to complete any research. You can’t use the same purchase strategy for every neighborhood; not even for every house! Likewise for your demolition and remodel – treat every house like a unique situation, and approach them as individual scenarios. It’s fine to have blanket plans for how you approach your problems and planning process, but don’t expect to treat your first flip like any of the ones you’ve imagined. Likewise, you can’t step into a property investment expecting to learn everything you need from the printed MLS sheet that the realtor has laid out. Do your research on the area, on the market, and on what buyers are interested in. This will give you the best possible chance of producing something that will be quickly and easily flipped, rather than fulfilling a false idea in your head of what “flipping” is supposed to be.
What have you found to be your greatest challenges? Your greatest failures? If you could go back to your first house and give yourself a piece of advice, what would it be? Contact us and share your thoughts!