Part 2: Don’t Make These Newbie Mistakes When Investing in Real Estate

Back again for Part 2 of the “Newbie Mistakes” post. In my last blog, I talked about the importance of due diligence, going over all the expenses, and having a reserve stash of cash, among other investment “musts.” Let’s continue now with the other 5 big errors that I see most often with beginning investors, and how YOU can avoid them once you start buying rental property.

1. Overpaying for a property. If you’re paying asking price on an investment property, you’re probably not getting the best deal. Get a price set in your mind of what you SHOULD be paying (you should be able to come up with a figure after you’ve made a few calculations), and be prepared to negotiate to get it. If the seller won’t budge and you’re not comfortable paying what they’re asking, walk away.
2. Thinking you’re going to get rich quick. Television shows have given way too many people the impression that they can become overnight millionaires through real estate. This is not true. You’re not going to make a boatload of cash from turning one real estate deal. If this is your endgame, you’re in the wrong business. Successful real estate investing takes time and patience, and you’ve got to be willing to put in long hours for a long-term payoff.
3. Not having an exit strategy. Investors who don’t know how they’re going to unload a property, should the need ever arise, are potentially setting themselves up for big losses. You never know what’s going to happen in life - economic downturns, health issues, a spouse being relocated across the country - and you’ve got to have a plan for liquidating your asset (i.e., selling the property) if necessary. If you don’t have this exit strategy in place, you’re going to be scrambling to get rid of the property, leading to unnecessary stress and monetary losses.
4. Paying someone big bucks to learn “trade secrets.” We’ve all seen the schtick of the “real estate guru” who promises to make you rich by sharing all his top-secret knowledge with you - for a steep fee, of course. Don’t waste your time and money with this nonsense. All the information you need can be found for free! Go to the library, get online, talk to other investors; there’s a wealth of information out there - no guru necessary!
5. Believing everything you read online. Newsflash, kids: anyone can publish anything they want on the internet. There’s no cyber police out there patrolling every website to make sure that what’s on them is legit. It’s your job as an investor to weed out the good intel from the bogus, so you can make the most out of your real estate investing adventure. I’ve heard too many newbies say, “But that’s what it said online!” Avoid this mistake by visiting lots of different sites and checking the credentials of the ones you visit most.

There you have it - the 10 biggest mistakes new investors make. Now that you know what they are, hopefully you’ll take the necessary steps to avoid making them yourself, so you can realize your potential as a successful investor.