3 Big Mistakes Every Real Estate Investor Should Avoid

Hilary FarrReal Estate Investing0 Comments

Starting a real estate business can be intimidating, but it will be easier if you learn to avoid making these big real estate mistakes from the beginning.

Starting a real estate business can be intimidating, but it will be easier if you learn to avoid making these big real estate mistakes from the beginning.

Starting your own real estate investing business can be intimidating and exhilarating. As you begin to get to know the real estate industry and the home remodeling business, you’re inevitably going to be over-prepared in some areas and underprepared in others. If you wait until you know everything there is to know about remodeling and investing in real estate, though, you’re never going to get started—because there’s always something new to learn.

I’ve noticed a lot of new investors making mistakes that have cost them quite a lot of money. If you want to build your wealth more efficiently and get the most out of your fixer uppers, avoid making these mistakes for your real estate investment business.

Viewing Other Investors as the Competition

First of all, you may compete with other real estate investors in some small capacity on certain deals. For example, you might find yourself in a bidding war with another investor at an auction, or another investor could be selling a comparable property near your latest fixer upper However, for the most part, you’re not in direct competition with these people, so viewing them as such doesn’t do anything to help you.

In fact, treating other investors as your competition can actually hurt your business. Imagine, for a moment, that you find a house at a great price, but you don’t have quite enough capital to buy it. At the same time, your contractors and project manager are stretched a little bit thin, too. They could take on some of the work, but not all of it. So, you have to pass on the deal, right? Not necessarily.

If you treat other investors like colleagues and potential business partners instead of competition, you might actually be able to take advantage of this deal by splitting it with another investor. Or, if you can’t take on this deal right now, you can pass it on to another investor. If you help them out now, they’ll be more likely to return the favor later on.

Spending Money on the Rehab to Make Money on the Sale

Next, if the price on a fixer upper is too high, you’re not going to make up for it with over-rehabbing. Spending extra money on your rehab to try to bring the market value of your house up is generally a bad idea. Remember, you make your money in this business by finding great deals on distressed properties and then bringing them up to market value.

With that model, even if you sell at just under market value, you’ll still make a profit. If, on the other hand, you use up your profit margin on expensive rehabs, you’ll just lose money and end up with an overpriced house sitting on the market for months.

Neglecting the Power of Networking

Finally, every successful real estate investor is a master of networking. Real estate is an industry built on business relationships, and by building those relationships, you can gain more avenues for leveraging capital for your fixer uppers.

If you neglect to network with other real estate investors, private investors, lenders, and other real estate professionals, you’re closing the door to a lot of opportunities for your real estate investing business. If you focus on creating and maintaining healthy relationships in this business, you’ll find that investing gets easier and easier and that your business and wealth grow faster than you could have ever imagined.

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