Real estate is one of the greatest wealth builders of all time, so it’s not surprising that people gravitate towards it … in droves. What’s even more alluring is the flexibility: you don’t have to be a tycoon or even a full-time investor to significantly supplement your income and rub shoulders with a high-powered network.
Do you want to be a passive investor, hands-on entrepreneur, or mogul in the making? Whatever that vision is, there are some common mistakes that can jeopardize your real estate career before it ever truly takes off.
Thomas Edison famously said, “I have not failed. I’ve just found 10,000 ways that won’t work.” While we could probably name thousands of mistakes real estate investors have made (us included), let’s start with the top three.
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MISTAKE #1: Waiting Too Long
For those who aspire to break into this industry, there really is no time like the present. We see so many would-be entrepreneurs dragging their feet, waiting for the “perfect” moment or enough zeros in their bank account before ever taking the first step. This phenomenon is also known as “analysis paralysis.” Real estate is a business that WILL require a (well-researched and risk-assessed) leap of faith.
Determine your investment strategy first, then seek out the deals that align with it. When you find that tailored fit, don’t hold back—even if it means reprioritizing travel plans or working through the weekends. Those sacrifices will pay off. Then, re-invest those returns to diversify your portfolio, earn more revenue, rinse, and repeat.
Ultimately, the train doesn’t wait just for you. If you spend years twiddling your thumbs, waiting to have enough money to invest in multiple properties at once, those lucrative first deals will keep blowing right past you.
MISTAKE #2: Flying Solo
This might feel like Business 101, but it’s always worth noting. Entrepreneurs are often touted as one-person shows, and many real estate investors are led to believe that’s a sustainable business plan. But every successful person has several consultants on speed dial or a highly skilled team behind the scenes.
They say your network is your net worth, and that holds true in the real estate industry especially. By tapping your network, you can gain so much more insight into deals, strategies, and potential partnerships than you would get otherwise. Networking isn’t only about sharing trade secrets but for sharing past mistakes. Learn from those cautionary tales, and don’t make the same mistakes yourself.
There are TONS of free educational resources out there as well. (Hey, you’re even looking at one now). Use them! Don’t have a network yet or looking to dive deeper? Join a mastermind group, find a mentor, and attend conferences—the relationships won’t build themselves overnight, but the effort will pay for itself tenfold.
MISTAKE #3: Losing Momentum
We see this one all too often: investing careers that get left on cruise control. Corners are cut, and mistakes are made. Deals eventually go south. Fully commit to your due diligence process and never jump at anything without analyzing it thoroughly. Yes, even those investment opportunities that seem foolproof or *chef’s kiss* perfect.
Passive investors fall victim to this mentality too. Your sponsor will be doing the hard work, sure, but you need to stay privy to the latest real estate industry trends, news, market patterns, etc.
How to Avoid Financial Pitfalls in Real Estate Investing
Although it carries some risk, real estate investing can be a wonderful method to amass riches and produce passive revenue. The possibility of financial pitfalls that could reduce your profits or even cause you to lose money is one of the greatest dangers. But if you have the proper information and tactics in place, you can stay clear of these pitfalls and succeed in real estate buying. Below is a brief guide on how to avoid financial pitfalls in real estate investing.
- Research and analyze the market: Conduct thorough market research and analysis to ensure that you invest in a market that is poised for growth and has good potential for appreciation.
- Create a comprehensive financial plan: Create a thorough financial plan that takes into account your departure strategy, risk tolerance, and investment objectives.
- Build a solid network of professionals: To assist you in making wise choices and avoiding expensive errors, team up with trustworthy real estate brokers, lawyers, accountants, and other experts with real estate business experience.
- Don’t over-leverage: Prevent overleveraging your assets because doing so can increase risk and put you in danger of going bankrupt if the market declines.
- Maintain proper cash reserves: Keep enough funds on hand to pay for unforeseen costs or market changes that could harm your assets.
These mistakes can cost you time, energy, and (most notably) a lot of money. But the good news is that these career killers are easy to avoid, and we’re here to help.
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Frequently Asked Questions:
Some common mistakes include not doing enough research, underestimating renovation or maintenance costs, overestimating rental income, ignoring market trends and conditions, and not having a solid investment strategy.
To avoid these mistakes, you should conduct thorough research and due diligence before making any investment decisions, have a realistic understanding of renovation and maintenance costs, accurately assess potential rental income, stay informed about market trends and conditions, and have a clear investment strategy in place.
A real estate agent, lawyer, accountant, and property manager all make excellent additions to a squad of experts who can help you as an investor avoid pitfalls and make better choices.
Your financial circumstances and investment objectives will determine this. Although they can yield fast profits, short-term investments are riskier. Long-term investments have the potential to yield more consistent yields over time, but perseverance and a sound long-term investment plan are needed.
You can stay up-to-date by reading industry publications, attending conferences and networking events, following industry experts and thought leaders on social media, and continuing your education through courses and certifications.
President of Saint Investment Group
Nic is a two decade seasoned expert in investing and capital raising, specializing in Real Estate and debt markets. With Saint Investment Group, he leads large-scale distressed asset purchases and innovative syndications for investors.