10 Real Estate Investment Mistakes

General Real Estate Investing
1

Here are 10 mistakes in investment real estate that can be made that will seriously impact your investment returns:

  1. Selecting a property that is poorly located.

  2. Believing that a property will always sell for more than it cost.

  3. Believing that rents can be increased to the level that the owner or agent says rents can be increased.

  4. Believing that you can reduce costs to the level that the owner or agent says costs can be reduced.

  5. Not calculating in your expenses the costs of tenant improvements or leasing commissions.

  6. Not doing your own market comparables for both rental rates and recent sales, for the six months prior to the offer date.

  7. Not having your loan rates and terms determined prior to going hard with your deposits.

  8. Not seeing the property at various times of the day and various days of the week before choosing it.

  9. Not paying close attention to the history of ownership prior to the current offering.

  10. Not selecting the right management company and developing a management plan prior to making an offer.

You also need to make sure that you know where your financing will come from BEFORE you go looking for deals.

2

I did delete my last post as after I re-read it I thought it was kind of rude So Tom I do apologize for that let me add something to what Tom is saying!

If there are any of these ten things that you are not good at HIRE HELP!Ask your Appraiser or inspector or realtor! It will be cheaper in the long run!

3

Here are some more big mistakes:

  1. Failing to get the proper REI education before starting to invest

  2. Failing to look at about 100 houses in your target area before investing

  3. Failing to have some cash reserves

  4. Having poor credit and trying to invest anyway

  5. Inability to make quick and accurate decisions

  6. Failure to network with other investors at your local REIA

  7. Being desperate to buy

8, Failing to have a well thought business plan

  1. Failure to buy at a discount

  2. Failure to run a cash flow analysis on properties that will be used for rentals (before buying)

  3. Being Lazy (this is a big one) - everyone wants to be rich, but very few are willing to pay the price

Mike

4

Mike…

I would add to #8. Failing to have a well thought business plan and sticking to it!. You gotta go with what got you there!

Keith

5

While this is not an investment mistake, it is a mistake…I am referring to making excuses for not starting. That is why I disagree with propertymanagers #4, about investing with poor credit. For some, including myself, that is just an excuse to not start. You might have more limits to what you can do, but bad credit will not stop you from investing. I have about 8-9 months before my credit will be somewhat decent, and I certainly am not going to wait…there are deals you can still do, just not as many.

I also think not doing due diligence is one mistake a lot of investors make, especially newer ones who might be overly motivated to do a deal.

6

h

Mike,

What do you consider a “proper REI education”? What do you consider a good “cash flow analysis”?

7

I would consider “a proper REI education” to be doing whatever it takes to at least understand the basics of REI. Personally, I completed the Carleton Sheets Course and read a couple of books before I bought my first rental property. Since then, I have read just about every REI book available; have attended REIA meetings; have been to a REI convention; have completed several additional courses, etc.

A good cash flow analysis is one that ensures that you will make a profit before you buy. For rental properties, this means considering the rent and all expenses to ensure that you will have a sufficient positive cash flow to justify the investment and to ensure a sustainable business model.

Mike

8

Can I add to #4

having poor credit issue

If you have poor credit do the right thing and bird dog or fix your credit credit is simple to fix!

I have personally taken people form 530 to 700 in two short months not even trying and not costing them a dime!

9

How did you do that? I dont have bad credit but know many people who do. Any hints or is the a price?

10

I’m curious to see this reply myself.

11

Bird dog them out to other investors! say you only make 2k per deal and do 10 per month this is easy to get done!

12

this is off the subject but does anyone know what is “zone RA10”?

13

Great thread Tom!

I will throw another mistake into the basket:

  • Not being properly insured

You need to protect yourself and your tenants as a landlord and things can go wrong when you have people living in your property.

Insurances that I currently have:

Building Insurance (cover for fire, earthquake, flooding and liability)
Landlords Insurance (protect against loss of rent, tenant damages)

Fortunately, I’ve only had to make one claim in 8 years and that was for a big storm that blew one side of my fence over. The fence was already rotted, so I was lucky to get the payout :slight_smile:

14

Inspection is essential before actually buying a property.