Before completing my pre – licensing course to become a real estate broker, I spent about three years as a “real estate investor.” I use quotations because I didn’t actually have the cash to invest in any property but I used my sources and connections to make deals happen. In other words, there’s all type of ways to get in on the action in real estate and learn different niches. Before you get all excited and message me about helping you to find your niche in real estate, let’s review some common mistakes of a real estate investing.
- Listening to Gurus – This is not a bad thing especially if the guru is your mentor or someone you know personally who has experience investing in real estate. However, don’t waste money buying books and materials, or attending classes for real estate investing. Most “gurus” are not real investors; they make their money selling the dream of real estate investing. A lot of information is available online for free! One of my favorite websites for real estate investors is biggerpockets.com.
- No Money Necessary – If you have listened to a guru you’ve probably heard that you do not need money to invest in real estate. Which is true to a certain point but ultimately the deal cannot go through without someone’s money. Other People’s Money (OPM) is a great source for investing, if you partner with someone. Or maybe you can work out a deal where you pay the seller in increments; either way expect to spend some money.
- Cheapest Deal – Too often I’ve seen the mistake of investors finding the cheapest deal. The problem is that the cheapest house is not always a deal. Usually when a seller gives up their house for a cheap price, there are certain conditions in the house that represent the cost of the house. You get what you pay for so make sure due diligence is complete before closing the deal.
- No Exit Strategy – In order to be a smart investor you have to have an exit strategy. An exit strategy is the plan you have for the properties you invest in. If you are a career investor, your exit strategies should be written in your business plans. Without an exit strategy you are just winging it and have no clear direction on the business side of investing. An example of an exit strategy is selling a home after you’ve renovated it. Your Plan B exit strategy would be to offer a lease to own option. The purpose of an exit strategy is to avoid holding on to a property that isn’t producing any revenue.
Just like any other investment, there is risk and myths in real estate investing also. Use these tips to avoid the common mistakes. If you are a real estate investor, or want to become one, and would like more insight contact me for a free one-on-one consultation.