4 Dumb Mistakes Investors Make

Everyone makes mistakes; it’s human nature. And most of the time, mistakes aren’t so bad that we can’t recover and learn from them, ultimately making us better at what we do. However, there are some mistakes that are bigger than this, and that can actually destroy your business. Some are pretty obvious, like failing to run the numbers or buying in a bad market, but others are more subtle. They’re stealthy killers that can destroy your real estate business. Here are 4 dumb mistakes that can spell disaster for you as a property investor:

Dumb Mistake #1 - Buying a “bad” property

Okay, this one is kind of broad, but it definitely qualifies as a dumb mistake. If you purchase a rotten egg of a property, you’re setting yourself up for failure. What are the rotten egg qualities I’m talking about? There are several: overpriced, bad location/neighborhood, crappy neighbors, title issues, “money pit” level repairs needed, and no nearby amenities, just to name a few. All of these add up to a place that can be tough to rent and even tougher to sell later on, which will amount to lost revenue and profits. Make sure you thoroughly vet every property to ensure its quality and performance.

Dumb Mistake #2 - Partnering with the wrong person

People aren’t always what they seem. Nothing makes this more obvious than entering into a partnership or agreement that involves time and money. This is where you’ll see a person’s true colors. Partnerships, while extremely beneficial and even necessary in some cases, are inherently risky because you’re introducing a whole new set of potential complications. You have to answer to another person, and they to you. If someone doesn’t pull their weight, or doesn’t consult with their partner before making decisions, conflict will arise and it could ultimately destroy your business. Before forming a partnership, be sure that you a) like the person and b) trust them to be fair and honest. This is the basis for any successful partnership.

Dumb Mistake #3 - Letting your emotions get in the way

There’s no denying that investing can be an emotional journey. But you cannot, I repeat, you CANNOT, let your emotions rule your decisions regarding investments. Emotions have a tendency to cloud your judgement, and that’s the last thing you need when it comes to money. Here’s a good example of this: an investor buddy of mine grew up in East Kansas City in a lower middle class neighborhood. The area isn’t the greatest in terms of crime, school district, vacancy, and a few other key factors you’d look for in a good investment. But my friend decided to overlook all that when a house came up for sale in the neighborhood which he had such a soft spot for. Fast forward 5 years, and he’s put a boatload of money into the place, dealt with some of the worst tenants ever, and has been trying (unsuccessfully) to sell the property for the last 6 months. All this headache because he had an emotional attachment to the house/neighborhood and ignored all the red flags that screamed “don’t buy it!”

Dumb Mistake #4 - Making promises and not following through

Know any promise-breakers? Me too, and I can’t stand them and I bet you can’t either. People who say they’re going to do something and then never do it or take sooooo long it becomes irrelevant are just kind of awful. That said, there are times when you can almost understand them. People get busy doing other things, or forget, or whatever, and things go by the wayside. Here’s the deal when you’re an investor though: if you do those things, you’re putting your reputation in major peril. Your rep is super important in this industry, and if you become known as a person who doesn’t follow through, you run the risk of being blackballed. Contractors won’t want to work with you, and neither will realtors or other investors. Why? Because they can’t trust you to do what you say. Bottom line: If you make promises to people, you better keep them.