3 Mistakes Investors Must Avoid

Being on the front lines in the real estate investment world, we see a lot of mistakes that can easily be avoided by other investors. Because we are lending, we have clients with lots of different strategies. We see what works, what doesn't and common themes to apply or to be avoided. The major areas to make sure you have down to a science are marketing, managing contractors and comping properties. Let's dig into these a bit.

Marketing is a the bloodline to your business. You can have all of the talent in the world as an investor, but if you don't have deals, you have nothing to invest in. Marketing is what bring you those deals so you can apply your fantastic set of skills to investing and increasing your bottom line. There are lot of ways to market but a few things to make sure you do no matter what your strategy is. Being consistent with your marketing is probably the most important thing. Many times investors complain about having a lot of deals and then having very few. The reason being, they originally turned on their marketing but then stopped it once they had a bunch of deals under contract. Instead of stopping their marketing, they simply needed to continue it in order to have a consistent deal flow. The other area is tracking your marketing. If you are paying for leads, you have to know how much you pay per lead to acquire a deal, know which marketing methods are working and which are not. If these two marketing concepts are applied properly, your deal flow will be cost effective and consistent.

The next area that many investors seem to struggle is with contractors. A great contractor is possibly the most important player on your power team. A contractor that is not good or is poorly managed can take a juicy deal and turn it into a loss. A good contractor can keep your bottom line healthy and your stress levels way down. When hiring a contractor be sure to check personal references and look at the book of work they have completed. It is certainly worth the time to spend effort in vetting the right contractors.

The final area to discuss is property evaluation. The truth is, most investors that bring us "deals" actually don't have profitable deals to submit. If we don't fund a project for you , it isn't because we don't like you but rather because we don't believe the deal is really a deal. To find good deals, you need to learn to evaluate properties correctly. You have to be able to determine the resale value after construction is completed. If you can't do this with a very high level of success, then every time you buy a property, you are putting real money at risk. The best way to learn to find the value of properties is called the 50 house rule. The 50 house rules is done by identifying a farm market and then going to see 50 properties for sale in that area. The smaller the geographic area the better. Take notes about pricing, days on market, condition, sales pricing etc. In a very short period of time you will be able to know when you are looking a great deal or not.

Ian Walsh