Avoid These Real Estate Investing Mistakes for Success

Real estate investing isn’t an exact science, and as such, it’s easy to make mistakes along the way, especially if you’re a new investor. While it’s a good idea to have a mentor – someone who’s been there, done that – to help you make wise investments, it’s also a good idea to pay attention to what others have done and try to avoid making the same mistakes they’ve made. 

To that end, we’ve put together a list of common mistakes many new (and some seasoned) investors make, so you can try to avoid them at all costs. 

1. Not Making the Power of Leverage Work for You

Leveraging, or borrowing money to buy a property, can make or break you if you don’t play your cards right. For example, under-leveraging yourself can restrict the cash flow potential of an investment while over-leveraging yourself can leave you drowning in debt. 

The trick to maximizing the power of leverage in your favor is to figure out what you’re comfortable with. You have to find a balance between leveraging too much that you can’t afford to pay the bills if the market crashes or you lose your tenants and leveraging enough to make the investment worth the risk. 

2. Not Hiring Outside Help

Running a real estate investing business (that’s what it is – a business) requires a lot of work. As an investor, you have to find properties, figure out the best deals, inspect said properties, attend closings, maintain/repair the properties, screen tenants, tend to tenants’ needs, collect rent, keep good financial records, and pay taxes. It’s a lot to handle for one person. As a new investor, however, you may be tempted to take on all these tasks yourself to save money. While this is possible if you only own one or two properties, eventually you’ll need to delegate some of these duties. 

Failing to hire outside help as your business grows can leave you with very little time and likely some very angry tenants. Even if you decide to manage a lot of these duties yourself, it’s a good idea to have a good handyman on your team to handle repairs and maintenance, an accountant for the financial side of things, and a trusted housing inspector to look at the properties you intend to purchase. 

3. Being Too Emotional

New investors tend to be overly emotional when buying their first investment property. Even some seasoned investors get carried away from time to time. It’s easy to fall in love with a property, clouding your vision to what’s really going on and potentially costing you more money than it should. 

If you find yourself getting excited about buying a certain property, take a step back and rationalize the purchase. Take a good look at the numbers and make sure it’s a good deal. Don’t let your emotions guide you in this business as doing so can have devastating consequences financially. 

Real estate investing is a business. There are risks involved, and even the most seasoned investor can make mistakes from time to time. If you learn from the mistakes of others, however, you can avoid making the same mistakes yourself.