Real estate investing is no different than any other business endeavor in that to remain successful and relevant, investors need to be cognizant of and recognize investing potholes and avoid mistakes. Mistakes, like investors, come in all shapes, sizes, and circumstances. Mistakes can run the gamut, from foolish to inconvenient, unfortunate to embarrassing, to being absolutely lethal.
I have written before on the worst investing mistakes, the most expensive ones, and red flags to avoid. There are far too many to be covered here but several possible lethal mistakes can be noted. Learning to avoid mistakes is a lot like muscle memory with consistent exercise routines. Rinsing and repeating steps will help you to avoid unenforced errors and other mistakes. Following strategies that have become routine to you will aid you in avoiding mistakes. Learn to avoid what you should and especially avoid what you must.
The very first consideration of mistake avoidance is planning your business. You must have a business plan and many of the same strategies you employ in your business model and blueprint will be the same strategies you invoke with every deal pursued. There will be similar mistakes to avoid with each. It should be self-evident that your real estate investing journey must be well planned and well thought out. Your vision and your investment strategy must be sound, well considered, and well defined. Not to have an exit strategy or multiple exit strategies with every deal you pursue, a plan A and a plan B at the very least, would be a major mistake to be sure. A strategy born of your particular skill set, your strengths and weaknesses weighed and considered in equal measure, and your goals and chosen end game, where you intend to be after a given calendar period and time of accomplishment. Never ever plan on the fly.
It certainly would be as foolish as it would be reckless and risky to purchase a piece of property without first having a plan in place and being reasonably certain the numbers work confirming you are pursuing a good deal. The old adage of “putting the cart before the horse comes to mind”. Backwards thinking to invest that way. You have the plan in place first, then seek a property that fits the plan. Follow your investment model and implement that model. Consider your moves before you act on them. Never get emotional about a property. Never fall in love with it. Investing in real estate is very different than a personal residential purchase. Have your strike price and your maximum allowable offer and stick to your numbers. It is all about the numbers so stick to your limits and always respect your calculations. There is just so much about knowing your numbers and sticking to them to avoid mistakes. You must do your research, your due diligence, your homework. Never overpay for property. Paying too much will be a major mistake and could completely sap your profits. Misjudging your cash flow or miscalculating repair and other costs can turn a good deal on paper, sour, and become an expensive albatross to an investor. Choosing an unqualified contractor or inspector for a due diligence home inspection could also be costly.
Decide on a niche that is best suited for you from the outset. Never chase all the shiny buttons. Choosing the wrong strategy could be a major mistake. Know what you seek to accomplish then take action. Know where you plan to invest before you actually do invest is a way to avoid mistakes. Knowing your market is integral in your success. Never enter a market either unprepared or ill prepared. Never rush into a deal. Timing matters.
You cannot accomplish everything by yourself. Never be a lone ranger. A jack of all trades is a master of none. Pinching pennies by wearing all the hats is penny wise and pound foolish. Learn to delegate to leverage others’ time, labor, and skill set. It would be a mistake not to delegate and try and do everything solo. Know your resources. Money matters.
Successful investors work well in tandem with their team, their circle of professionals that allow the business to hum. Not having a team is a big mistake. Always work with the right people.
Learn your art. The importance of education and knowing what you are doing should never be underestimated. Investing in your education is well worth it. Failing to do so can be costly. Seek knowledge through the expertise of others. Network, network, and network some more. Associate with a mentor who can coach and guide you. Seasoned investors appreciate the value of mentors as many of them see their success in the guidance they have received. For many investors, not having a mentor is a mistake.
Two final mistakes you must avoid at all costs. Never underestimate the value of marketing and the need to always be making offers. As to the former, you are in the marketing business, not the real estate business. Always be marketing. If you don’t, you have a hobby, not a business. Real estate is a numbers game. Make too few offers and you don’t have a business.
Successful real estate investors are consummate entrepreneurs. They learn what to do right and what to avoid. Avoiding real estate mistakes is therefore key in attaining real estate success.