Real Estate Investors 10 Biggest Mistakes

An article in MSN Money entitled, Real-Estate Investor’s 10 Biggest Mistakes has some tips on what not to do in real estate investing.

1. Planning as you go
   • The problem is that most people look at real estate as a transaction instead of as an investment strategy, says Doug Crowe, a Chicago real-estate investor and speaker.

     “People fall in love with a property,” says Crowe, the managing director of Springboard Academy, the nation’s only real-estate academy for investors. “I say, ‘Who cares about the property?’ I fall in love with a motivated seller.”

2. Thinking You will get rich
   • That kind of wrongheaded thinking is fueled by “these self-appointed gurus who have infomercials and make it sound so easy to get rich in real estate,” says Eric Tyson, a co-author of “Real Estate Investing for Dummies.”
3. Playing Lone Ranger
   • It is very important to build a team of professionals including accountants, lawyers, handymen, etc.
4. Paying too Much
   • “The profit is locked in immediately once the investor buys the property,” Due to mistakes in the analysis, the investor pays too much and then is surprised later when he doesn’t make any money.”
5. Skipping Homework
   • Educate yourself before you put your family’s financial security on the line
6. Ducking Due Diligence
   • “Sometimes, new investors are buying property just based on the idea that the property is going to appreciate,” says Houston real-estate agent Laolu Davies-Yemitan.  “Usually, they don’t have any information to substantiate that.”
7. Misjudging Cash Flow
   • Most investors think once they buy a property the rent will make up for the mortgage. This is usually not the case. There is a lot of cost in running a rental property including maintenance cost, property management cost, taxes, vacancy cost, etc.
8. Lowering the Volume
   • A true real estate investor who is running a real estate business does not do one deal at a time. This is called transactional deals. Instead, a real estate investor should have a pipeline io prospective deals to help reach economies of scale. Think of the power Wal-Mart has when they buy from vendors, they can buy in bulk which means they can save on cost.
9. Painting yourself into a corner
   • Some investors buy property to either sell or rent it out. What if the rental market sucks or you can’t sell the property? Investors should always have a plan b and c. For example, you could try to do a lease-option or sell it to another investor at a wholesale price.
10. Miscalculating estimates
    • You should always double the amount of time and money you think it will take to rehab a property.