Real estate investing can become a powerful vehicle for building wealth, if you do it right.
Here are the 3 biggest mistakes that people make when getting into real estate investing:
#1: Trying to Learn Without a Mentor
It’s easy to get enthusiastic. Those house-flipping TV shows inspire you and make it look like 99% fun… but they also gloss over the expensive realities.
Working with a property investment mentor can seem like a painful upfront cost, but it will shorten your learning curve and help you avoid costly mistakes.
How can a mentor help you?
Take the emotion out of it. When you’re looking at an investment property, you’re looking at how it will meet your portfolio needs and not your emotional A mentor can help you see past the emotional impact of a property and help you determine its value to you, from the perspective of what the market will pay for, not what you love.
Expert guidance in choosing the best areas to invest in: a market-driven approach that may take you out of your comfort zone.
Help navigating a project’s tax implications, designing marketing strategies, property valuation, and changes in strategy.
#2: Thinking You Can Do a Rehab Because You have Watched HGTV or Take a “course.”
It looks like fun, doesn’t it? Take a dilapidated old house, make it into the envy of the neighborhood, and quickly attract wealthy buyers.
It can be fun and lucrative. But have you considered:
Do you have a vision? Can you see a property’s potential from the buyer’s perspective? Can you accurately project the end financial result?
Do you have an appetite for risk? You need nerves of steel (and spare cash) during the rehab process but also if your house doesn’t sell quickly.
Do you have more time and more money than you think you will need? You will need an excess of both. Flipping houses is a full-time job, and houses are notorious for being money pits.
#3: Not Understanding That This is Not a Get Rich Quick Business
Nearly half of all new real estate investors never make it past their first year because the business is a lot harder than it looks.
Even under ideal conditions, in the best-case scenario, there’s still often a disconnect between the projected ROI and the reality.
Real estate often comes with unexpected costs: rehab costs go over budget… or the market says “meh” to what you’ve done… or the tax man cometh in ways you didn’t anticipate.
You won’t make it big on every deal. It will be more like a series of small wins that add up over time.
You may make rookie mistakes that you can leverage later. But will there be a “later”? Will you have the time, resolve, cash, and nerves to do it again?
“Overnight” success typically takes years. You may need to find a niche… or the right contact among realtors… or be in the right place at the right time. You have to be willing to work twice as hard as you envisioned and spend twice as much. But you CAN make it big.
There is no magic formula or “get rich quick.” Investing has and always will be about education, hard work, and perseverance.