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.
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.
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!