Why Investors Fail? Part 1

[Andrew Holmes]

This post will probably make a few if not a lot of folks mad but I figured why not mention realities of investing in real estate. 

My Opinion: Most investors over time will have marginal results at best when they invest. 

I have often pondered this question. Everyone wants to succeed. It is not that they lack desire, passion or are not smart. The fact is that real estate investing specially if you want to do well is tough. I wish I could say it was easy but it's not. My feel that most people will get bruised and bloodied . This is not just my opinion this is the fact. 

So let's start with the basics. 

70% will fail

25 % will have decent results

3 % will have success

2% will succeed at an extra ordinary level

A lot of investors invest for quick profits or appreciation. I think this is very fool hardy. Most people invest in real estate for the following reasons

Appreciation or quick profits then cash flow they never think about equity.

Personally I have a few very simple rules

1. If you take care of real estate for the first 5 years it will take care of you for the rest of your life.

2. Any property that does not put money in your pocket at the end of each month is a liability.

3.  Any body that said High Risk = High Return was a complete fool. 

Low Risk = High Returns

The entire point of investing is to keep reducing your risk so you can increase your returns. 

The three basics that need to kept in mind when investing

1. Equity - When you buy a property it needs to have equity. The greater the equity the better the grade of investment. The point of investing is to buy something that is worth a lot more for a lot less.

2. Cash Flow - Any property that you buy must have a debt coverage ratio of a minimum of 1.5% otherwise it's too risky. (I know folks will think I am too conservative)

3. Appreciation - Is not something you invest for. It's something that happen over time and you should be great full when it does come along. You cannot predict appreciation. Over time it will happen be great full when it does. 

Always Remeber: Pigs get fat, Hogs get slaughtered