Ask any investor and they’ll tell you – real estate mistakes happen. Proverbs 24:16 (a) says it best: “For the righteous falls seven times and rises again…” The grace of God makes it possible for us to not only recover from our mistakes, but learn from them. This type of resilient learning is a key to success in real estate.

As a real estate investor, it’s important to be a problem solver. That means you’ll have to expect and accept that problems happen. The good news is that there are ways to avoid common real estate mistakes. In this blog, I identify seven common real estate mistakes so you don’t have to learn them the hard way.

Seven common real estate mistakes are:

1. Waiting To Get in The Game

2. Lack of Focus

3. Not Maintaining a Cash Reserve

4. Flying Solo

5. Failure To Inspect Regularly

6. Getting Emotionally Attached

7. Not Having an Exit Strategy

1. Waiting To Get In The Game

Time waits for no one, and neither do smart investments. New investors can make the common real estate mistake of waiting to get in the game later rather than sooner. When you invest in a new property, you start to gain knowledge and experience. 

When you get in the game and purchase property, you have the opportunity to gain more assets and increase your wealth. Even if you end up losing some money in the process, experience will become a great teacher to help you learn how to make it back. The bottom line – in order to make money in real estate, you’ll need to pull the trigger and start purchasing property.

2. Lack of Focus

Real estate mistakes can happen when you lose focus. Many new investors don’t keep their focus on what will make them money. When you are considering purchasing property, you should look at new deals every single week. 

It’s important to note that you make money when you buy real estate, not when you sell. Your focus should be on buying property. Ask yourself these questions to help you stay focused:

1. Am I getting in this property for no more than 80% of its real value?

2. Does it offer cash flow?

3. Is there $300 positive cash flow per month on a single-family home?

When you answer yes to these questions, you can make informed decisions about the best property to buy. These questions can help you focus your energy on writing contracts for deals where you know you’ll actually make money. You can avoid this  mistake and evaluate if the numbers make sense for you to move forward with an investment.

3. Not Maintaining A Cash Reserve 

Another common real estate mistake is not maintaining a cash reserve. A cash reserve is the money you use for short-term and emergency needs. When you purchase a property, your money is tied up unless you sell or refinance. New investors make the common real estate mistake of using all of their money on new property purchases and repairs. 

There are ways to work around these types of real estate mistakes. A real estate agent can help guide you to make an investment that won’t tie up all of your cash reserves. New investors should also aim to keep uncommitted cash in an untouchable account to make sure they don’t run out of liquid cash. If you don’t have at least six months worth of cash reserves, a lender will likely turn down your request for a refinance loan. Make plans for your cash reserves before you purchase property to avoid this pitfall.

4. Flying Solo 

Ecclesiastes 4:9 reminds us that, “Two are better than one, because they have a good return for their labor:” Real estate is an industry where this truth can easily be applied. A common real estate mistake that new investors make is not having a team.

All teams won’t look the same, but there are some key players that could help you find success in real estate. Here are some key players that you’ll want on your team:

– Real estate agent

– Contractor for repairs

– Property manager

– Mortgage broker

– Banker

– Insurance agent

– Accountant

– Attorney 

A great team will help you avoid some costly real estate mistakes. Whether you purchase property locally or offsite, find experts to teach you how to make wise investments.

5. Failure To Inspect Regularly

Your job is far from over after you purchase a property. It’s important to visit your properties once a month to once a quarter. This will help you stay on top of any repairs that need to be made. If you have a property manager, you don’t have to always visit a property in person. The property manager can create an inspection report for you.

6. Getting Emotionally Attached

It’s easy to become emotionally attached to a property. When you find a property that you love, an emotional attachment to the aesthetics, location, or other factors can cause you to pay far more than it’s worth. Emotional ties could also cause you to over rehab a property. 

One great way to avoid this common real estate mistake is by looking at the numbers. Make sure you can get money from the added value that you put into any property. Instead of letting appliances tell a story, let the numbers do the talking for you.

7. Not Having An Exit Strategy

What are your long term goals for your property? It’s important to answer this question to avoid the common real estate mistake of not having an exit strategy. When you buy and flip, set a goal with a time frame when you expect to get your money back from the investment.

An exit strategy will help you understand what formula you’ll need to get a return on your investment. Remember, you are building wealth. Your exit strategy should lead you to financial independence. 

For more real estate investment strategies, join us for our Real Estate Workshop where we will teach you all you need to know to start investing. Click here to learn more.