5 Avoidable Mistakes That Swallow New Real Estate Investors

Every real estate investor was at one time a “newbie,” someone who is just stepping out into the world of real estate. Mistakes are made be each of them, some of them detrimental, some of them not so detrimental, and all of them lessons to learn in order to be successful in the real estate investing game. Here are the top 5 mistakes that newbie’s make:

1. Under-estimate the Market

Most newbie’s believe that they can get something for nothing, especially in this economy. They think that most seller’s will willingly give them the property for next to nothing. Does this happen? Do seller’s give properties away? Rarely. Sellers are selling because they want to: a.) sell, and b.) make money. A working knowledge of the value of a property is critical as opposed to the “what I want it for” value of the property. Knowing the market and how to point out flaws in an investment property can be the difference between picking up a great deal and killing a deal on the spot. Making a connection with a seller and coming to a common ground while still maintaining the profit in a deal is very important. Many newbie’s lose out on several properties before they learn this lesson.

2. Neglect to get finances in order.

A fatal fall for many newbie’s is that they do not get their finances in order before making an offer. This includes investors who are purchasing cash – the closing company wants to know where your cash came from, so it must be established in a bank account or a proof of funds letter from your personal banker. If this is something that you do not have lined up, there are several companies out there who offer POF letters that are relatively easy to obtain.

3. Under-estimate Cost of Repairs/Updates
A big pitfall for a newbie is that they do not have a comprehensive understanding of repair and updating costs, or worse, think they can do it themselves. The result? Loss of time to rent or sell the property and going over budget. The best way to fix this mistake is to acquire three quotes from different contractors. The newbie will learn more about repairs, updates and costs. When you’re getting started, no matter if you’re a wholesaler or a rehabber; it is always a good idea to make a connection with a trustworthy contractor in your area. Throw him a few bucks, buy him lunch, or even fill his gas tank up and he will gladly walk you through some of the tuff evaluations.

4. Driving out to look at every single property

New investors often want to drive out and look at every single property that they get a phone call about. This can be very expensive and time consuming. In a year, it is not uncommon for an investor to get leads on 100 – 200 great properties. If they were to drive out and look at every single one, then this would be a 60hr a week job. Don’t do that. Qualify your leads on the phone. Make sure the sellers are motivated, ask about repairs, and crunch the numbers before you decide to drive out. If there is no profit in the deal then why should you drive out to look at it? You shouldn’t!

5. Act too slowly in purchasing.

It is difficult for a newbie real estate investor to act quickly because they do not have the experience or knowledge yet to back themselves up. What often happens is they lose out on great investment properties because they do not “pull the trigger” to make the decision to buy. The loss of potential income is impossible to calculate from this mistake. How to avoid it? Become knowledgeable and confident so good decisions can be made in haste.