The Death Of The Residential Real Estate Investor
by Sean Flanagan September 26, 2008
There are some common mistakes that can kill your real estate investing career before it ever even gets started. By avoiding these common mistakes, you can push your business to the next level of success and circumvent some of the pitfalls that kill most real estate investorsí careers before they ever really get started.
Get focused. Here are some of the most common mistakes in real estate I see when working with beginners:
Failing to Plan is Planning to Fail
You need to plan ahead to get where you want to go and if you don't even know where you want to go, how can you get there? You wouldn't show up at the airport and expect to catch a flight to your specific destination within minutes of your arrival unless you had already booked a ticket. Why invest all your time and money without a game plan? Take a few hours when you are starting your business to write down the goals that you want to accomplish.
Write down short-term (30-day) medium-term (3-months - 1 year) and long-term goals (2-years, 5-years). You can refer to these goals consistently to ensure your business is on the right track. Plan your work; work your plan. You'll see success this way.
Get an Education, But Proceed With Caution
I'm not talking about wasting your time with a college degree. However, having a solid real estate investing education, which you can't get in college by the way, can make a big difference for your business.
The industry of real estate investing has a vibrant and fast pace. If you are starting your own real estate investing business, education is very important. Study everything you can find to study related to your new profession.
However, be careful because there's a self-proclaimed "expert" around every corner, with something to sell you. While there are many legitimate, experienced investors out there who offer "how to" courses and seminars, I can assure you with 100% certainty that many of the "experts" selling the latest and greatest "magic real estate pill" are nothing more than salespeople disguising themselves as real estate experts.
So, the obvious question here is how does a new investor who is being offered a new magic real estate pill from every angle, decipher the good from the bad. Unfortunately, no one can give you a "formula" to decide who to learn from. However, keep this in mind: If it walks like a duck and talks like a duck, it's a duck. Trust your "gut" feelings. If it sounds too good to be true, it probably is. Nothing can replace hard and smart work combined with real world experience, not even a $10,000 boot camp.
Jack of All Trades
While it's important to specialize in your chosen real estate niche, it's important to understand every aspect of the residential real estate game so you can exploit all opportunities.
For example, a smart investor may focus on the wholesaling niche and plan his business accordingly. As a wholesaler, he needs a reliable and steady source of leads. So he runs TV commercials in his local market to get the phone ringing off the hook. Every lead that comes in is first qualified as a wholesale lead and if it doesn't work for a wholesale deal, he then considers other exit strategies to determine if the lead is worth pursuing further.
The above example shows you that the wholesalerís first choice of exit strategies is wholesaling, so he needs to become an expert in that niche. But, it's still important for him to understand other ways of doing profitable deals so worthy leads don't go to waste.
Protecting Yourself from the Ambulance Chasers
Do your research. Set up a corporate entity to protect yourself. If you are lazy or put off setting up a corporation, you could face a lawsuit that will destroy your personal wealth. Protect yourself. Protect your business. Set up a corporate entity that fits your company profile before doing any business deals.
A big part of real estate investment success has to do with knowing your market. How much are properties worth? What prices are appropriate in some neighborhoods - and way too expensive in others?
Understanding how much to pay for a piece of property will affect your profit, future sales and inventory. Do your research to get a better idea of the property values in the areas you are looking and take advantage of economic situations to find great deals on quality properties.
Table Top Closing and Title Issues
When an investor does a "table top" closing, he rarely checks the title. You're opening yourself up for a mess if you neglect this one. It's a sure recipe for a lawsuit.
What happens if you take a sellersí word for it that there's no liens on their property? You then take over payments subject to the existing mortgage, put a tenant/buyer in the property on a lease/ option, then find out when the tenant/buyer exercises his option to buy that the house has a $50,000 IRS tax lien attached to the title! You're scr**wed and you can expect a lawsuit.
Getting the Wrong Number
Getting the wrong numbers for a property can be quite damaging to your business. You can tie up too much money and IF you do finally sell, your profits will be much smaller.
When real estate investors first start out, they will often pay too much for a property OR pay too much to fix the property. Either mistake can cost your business and make you lose all of your financial equity. Do your research and know your numbers, including estimates of what it might cost to get certain projects completed.
Get more from your real estate investing business when you avoid these common mistakes. The real estate industry can be complicated, but the more experience and research you complete, the better off you will be!
Sean Flanagan has a FREE audio course titled 7 Secrets to Making Big Bucks in a Slow Real Estate Market which you can get right now by visiting http://www.YuckyHouseSystems.com. You can also go to† http://www.YuckyHouseSystems.com. to get a trial coaching program for new real estate investors. Reprinted by Permission. Copyright © 2004-2014 BiggerPockets Inc. All Rights Reserved.