Real Estate Investment Mistakes - Debunked
Wow! Reading all the articles on real estate investment mistakes may have you feeling like a complete idiot. Not so fast. What are common mistakes made by real estate investors? You can read many articles in magazines and on the web identifying real estate investor mistakes. You will read many headlines such as:
• Top 7 Mistakes New Investors Make
• 7 Deadly Sins of the Real Estate Investor
Real estate investors, when they are new to investing, do indeed make some mistakes (hey, you are only human) HOWEVER are they really mistakes?
Having invested in property for more than 35 years, I am the first to admit that I made mistakes, more so in the beginning as I was new and learning to navigate the arena of real estate investments. I now read all these articles on making mistakes (I trust you have seen many of them as well) and I am here to debunk many of these articles as not really mistakes at all. I find myself reading articles every day, with my vast amount of experience in real estate, I read these so called mistakes and find myself saying:
“Wait a minute how about looking at the other side of the coin”. I find most of these so called mistakes are better classified as, “You have a different viewpoint than mine so you are making a mistake.” I see mistakes identified in one article that is in total contradiction to the other articles. Let’s look at examples.
Alleged mistakes investors are making:
Mistake: investing in multi-family properties. You have multiple people living under one roof, the tenants do not pay their own utilities (in most cases) so they leave their lights on and run the water bill way up. The properties are hard to sell and the only buyer is an investor who wants to get the property at a reduced price so he can make big profits. These unforeseen controls make it impossible to establish consistent cash flow.
Debunked: O.K. the statement is true but does it mean it is a mistake to buy? Sounds more like an opinion, sort of the con side of the pros and cons.
The pro side would read something like this:
Multi family properties are great because you have economy of scale pricing, property management is easier and cheaper. You only have 1 roof and 1 yard to maintain to cover many rental units creating less exposure to risk during time of repair and maintenance.
Let’s look at other articles I read stating the opposite:
Mistake: Investing in single family homes. You only have one income stream, you do not get economy of scale pricing on property management or repair, and when the unit is vacant you have zero revenue coming in.
Debunked: O.K. the statement is again true but does it mean it is a mistake to buy, again this sounds more like an opinion, sort of the con side of the pros and cons. Is it possible that both of these asset classes are a mistake to invest in?
The pro side would read something like this:
The best asset class is a single family property, they are more liquid and because they are used as a home they represent the best property to invest in. As there are more buyers for these properties they are easier to sell for top dollar to a retail buyer. You can have the tenant pay all the utilities, mow their own lawn and you do not have all the management headaches of many people living together under one roof.
So is it true?
I could provide dozens of examples but I believe you are wise enough to get the point. So, two different articles are stating the opposite thing as a mistake. Given that, are these really mistakes investors make or is the author providing an opinion based on their perspective, or perhaps designed to be self-serving?
I often see that these articles are designed to be more self-serving than factual comments. They are mostly opinions and designed to lure your beliefs to match their belief. These articles on all the mistakes investors are making tend to position the author as the expert who knows how to keep you safe and avoid these mistakes. Now some of these articles are awesome and most all of the comments are always true (but perhaps are self serving).
How do you stay confident when so many people are suggesting you are making mistakes? (The means test).
There are times when these comments on mistakes are self-serving and there are times when they are education based. When reading these articles always ask yourself, is this a fact or an opinion. Is there something for the author to gain by telling you these are mistakes and then telling you a better way to think? If the so called mistake is subject to another opinion you definitely want to consider the other opinion before establishing whether you made a mistake or were subject to someone’s opinion. An education based article tends to be more based on fact or experience than opinion.
Real Estate Investors Single Biggest Mistake
Working with 100s of investors and having personally invested over 35 years I believe the mistakes investors make are really boiled down to just this 1 basic mistake.
They fail to have a clearly defined objective in place; they bounce from one strategy to the next (sort of chasing the shiny object) because they have not clearly identified their investing strategy.
These articles on mistakes have them questioning whether they are doing the right thing or not. Do not fall into this lure.
When you have clearly defined goals in place and you share these goals with all the decision makers and the professionals on your power team, (Your real estate attorney, realtor, accountant, property manager and trades people), you will then not be caught up in chasing the shiny object. You will not be distracted by the so called mistakes investors are making. You will advance your investments forward based on purposeful objectives.
Avoid real estate investment mistakes by having a plan in place! Check out our real estate investing plan worksheet today >> click here.