8 Pieces of Advice Newbies Can’t Afford to Ignore

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I met a client last week who told me something that really touched my heart.

He said “Amanda, looking back on the last 5 years of investing in real estate I realized that I have made so many mistakes along the way that were so costly. Does that happen to everyone and what could I have done to avoid those mistakes?”

His comment struck a chord with me because I was in those same shoes. I think that as we look back on investing (and life in general) there are always going to be things that we wish we had known beforehand.

The fact that we made mistakes or bad decisions does not necessarily mean that we did something wrong or that we missed the target by some fault of our own. It is just a part of growing. In fact I can say that I have never met an investor who didn’t make any mistakes.

So instead of talking about taxes or finances this week, I think it would be helpful to talk about some common investing mistakes that I see often, and if you are a newbie investor, then hopefully one or  more of these points below can help prevent you from making a bad investment move.

The 8 Pieces of Advice Newbies Cannot Afford to Ignore

The following are 8 pieces of advice that newbies need to pay attention to.  These will help prevent you from making terrible investment decisions and put you on the path to becoming successful earlier than most.

1. Take the Time to Learn:

Learning from the mistakes of other investors is likely the best way to leverage your time. Instead of re-creating the wheel or making costly mistakes, learn from others who have done this before.

2. Know What’s Important:

A smart investor focuses on what his or her return will be.

One of the best pieces of advice I received from a mentor when I first started investing was “don’t fall in love with the dirt”. As hard as that may be, focus your energy on the numbers behind the deal and don’t let that beautiful master bathroom lead you astray. Analyzing an investment is not the same as buying your dream home.

Related: 4 Difficult Questions Every Real Estate Investor Needs to Ask Themselves

3. Take Action:

You can read books or attend seminars all day long but there is no better way to get into real estate than by taking action.

Get your feet wet by making offers, speaking with investors, and analyzing deals early on. Don’t waste too much time sitting on the sidelines.

4. Be Realistic:

You undoubtedly have read books or heard about how easy it is to get into real estate with no money and no experience.

Behind every successful investor are the stories of their sweat, tears, and failures that pre-empted their success.  Know that you will make some mistakes along the way and that it’s okay.

Accepting that mistakes can happen and that it is a natural part of investing can help reduce the anxiety associated with pulling the trigger on your first deal.

5. Get Your Team in Place:

None of us can understand all there is to know when it comes to investing, nor do we have the time to do everything that needs to be done for our properties.

Just as we leverage the bank’s money, we can also leverage the experience and knowledge of others around us. From attorneys and accountants to property managers and appraisers, leveraging your advisor’s experiences and expertise can help you to avoid common investing mistakes.

Related: The Five Fundamental House Flipping Team Members

6. ListenTo The Right People:

If you are using a realtor to find your properties make sure they belong to the National Association of Realtors, because then at least you know they are mandated to adhere to strict ethic codes.

The right realtor can also help you look for the best properties. Listen to fellow successful investors and you may be surprised by how many great recommendations and sources for reliable information you can find.

7. Build a Business Not Just a Portfolio:

You should view this venture as a business and approach it with realistic goals.

To make sure that you treat your real estate as a business, it would be to your benefit to create a business plan that provides details as to how you will run your business over the next 1-10 years.

8. Stay On Top of Your Credit Score:

We have all heard of no money down real estate but let’s face it, one of the cheapest forms of funding for real estate is still bank money.

Many lenders require 700+ FICO scores and want a healthy debt-to- income ratio. Keeping an eye out on your credit score can help you to obtain cheap financing.

Would any of you seasoned investors add anything to this list? 

Be sure to leave your comments below!

 

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About Author

Amanda Han of Keystone CPA is a tax strategist who specializes in creating cutting-edge tax saving strategies for real estate investors. As real estate investors herself, Amanda has an in-depth understanding of the various aspects of investing including taxation, self-directed investing, entity structuring, and money-raising.

14 Comments

  1. All great advice. Learn by doing, and following others in their transactions if you can. “Buy’ as many properties as you can on paper, look at the MLS. Loop, etc and do the analysis.

    And save money. Money can be the grease that gets you there.

  2. Hi Amanda, I loved..your article until I got to number 8. :(
    I pulled my credit report and with disappointment it’s extremely low, I do not ‘t have the amount needed to cover debt in full. Will this stop my dreams of financing my 1st investment property. My goal was by end of December. I have even been considering bankruptcy. Any advice would be appreciated :)

    • Lutonya

      There are lots of other ways to fund a real estate deal so just because your credit is not the best does not mean you cant achieve your goal to get a property before year-end. There are lots of creative ways to get involved in real estate and lots of other articles and blogs on BP you will find helpful. Filing BK is not something to be done lightly so I definite recommend you speak with your own financial and or tax advisor before pulling the trigger on that one.

  3. @Lutonya, the first thing you should consider is eliminating as much revolving debt as you can. When you’re ready to look for a property consider an owner occupied FHA loan, I think it’s as little as 3.5% down. Find a duplex and live in one side and rent the other.

    • Andy Jacoby II on

      Solid advice I would add to #3 to be consistent in your action. You need to again treat this like a business, not a hobby. You should set aside time each week or daily as is possible to dedicate to your business. Also Lutonya take the time to seriously educate yourself about credit as their are things that many of us simply are not aware of, before you declare bankruptcy. There are folks out there that can help you with regard to credit repair but don’t expect it to happen overnight. As Amanda brought up in #4, you have to be realistic in your expectations.

  4. Amanda – thanks for sharing the business plan for any newbie out there like myself to follow.
    Greatly appreciate it.

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