Three Mistakes New Real Estate Investors Make and How to Avoid Them

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As an active investor and willing presenter at local real estate investment clubs, I am often asked about what common mistakes new investors make. Regrettably, I am rarely asked how to avoid the mistakes. The list of mistakes new investors can make is unfortunately rather long.  In this post I am going to focus on three mistakes I find as prevalent, annoying and altogether avoidable.

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Three Avoidable Mistakes New Real Estate Investors Make

New Investor Mistake #1: The “Shooting Star” Syndrome

I am sure you have seen this investor if you have been in this business for more than 6 months.  Their passion burns bright.  They are buying every book and education program insight.  They are active contributors on BiggerPockets Forums and other real estate sites.

Then, without warning, their passion is gone — the books go unread, the programs unwrapped and you never see them post another comment. It is this rush of passion combined with the sudden disappearance of interest that has caused me to call these investors the “Shooting Stars”.

If you see yourself, a family member or friend acting in this manner, ask yourself or them what you/they have learned and what you/they want to accomplish with the business. If you can step in while the passion is still burning and get them to stay focused, you might be able to keep them in the game.  I have found a two-step process that works best.

First, I ask the “Shooting Star” to clearly outline why they think real estate is the answer and what they expect to get out of the business.

You will likely get high-level non measurable answers.  Such as, being successful in real estate can give me freedom, allow me to quit my job or make me rich.  None of these answers are good enough.  I need them to think about how much money they want to make a month or year.  I want them to talk about why they want freedom or the ability to quit their job.  I want them to think about why they are in this business and what they expect from the business.

Second, get them to set goals in 90-day intervals.  Set a one-year goal and then break it down into small intervals, so we can show and measurable progress.  If you can create achievable short term goals, you will continue making progress instead of giving up before you even began.

What are your 90-day goals and how do you track them?

Please don’t be a “shooting star”. This is a great business it just takes time to get the momentum going.

New Investor Mistake #2: Angry Math Teachers

The most common “Angry Math Teacher” is “analysis by paralysis”.  When you spend more time analyzing a deal than looking at the property, you have a problem.  I am sorry, but a deal is a deal and no amount of analyzing is going to make a deal look worse or better.

If you are constantly tweaking a few numbers to make the deal work, it isn’t a good deal.  Move on to the next one.  A marginal deal is not a deal.

Another “Angry Math Teacher” is “Excel Kong Fu”.  This is the investor who can manipulate a spreadsheet and make it calculate 10-year Performa’s, depreciation scales, rental rate escalations, and so on, before they even start on their first deal.  All of that stuff is great, but instead of spending hours building endless excel sheets please go out and look at more properties.

Remember, a Deal is a Deal and a fancy Excel workbook won’t help a bad deal look better.

The good news is that both of these issues are actually easy to fix.  It starts with getting a baseline understanding of your market, and is followed by creating your criteria to what a deal is.

Once you have your criteria, start executing offers on properties that match your criteria and ignore the ones that don’t. Don’t let the “Angry Math Teachers” waste your time or worse yet, cause you to buy a marginal deal.

New Investor Mistake #3: Karma

The final mistake is “Karma” — more importantly what it takes to get Karma to work for you.

I run into new investors all the time who have all the energy in the world,  they are just looking for that one break.  They know to their core that all they need to be successful is one lucky break and they will do the rest.

I am sure this strategy has worked for a lucky few but I wouldn’t count on it.  Instead of hoping positive energy will equal success and that one big break, I suggest you focus on creating value.

There are lots of new investors with no money. However if you have time, passion and energy you can be successful, but it will take work and commitment.

Those with no money need to focus on their market; they must understand value, and be able to spot tremendous deals and solve seller problems.  If the new investor can spend their energy in this fashion, they will attract well-funded investors that are long on capital and short on time.

Karma will smile on the investor who does that and the deal flow will start.  Once you are known as an expert in a market segment and can spot or create deals, you will have Karma on your side.

Let me be clear – Karma is a great partner to have as a new investor; the harder you work, the better your chance of seeing Karma pay you back.

So get to work, learn your market, meet new people and you will eventually have Karma working for you.

Good Investing

Image: graur razvan ionut /

About Author

Michael Zuber is an active buy-and-hold real estate investor who still has a full-time job. Michael is not an agent or broker, and simply uses the internet and agent relationships to drive his business. He currently averages at least one deal a month and has developed laser focus on his 5 step process.


  1. This is a good article making good points. I’d like to emphasize your point at the end about meeting new people. My contact base has been the secret of my success over the years. I’ve bought houses from other investors and sold houses to other investors. It’s not just about talking to each other once in a while but it’s about actually doing business with each other from time to time. Anyway, it works for me.

  2. Mike –

    You made some very good points. If there is one thing new investors should take away from this it would be “don’t do marginal deals”. As you said, when you are new most folks spend entirely too much time trying to make a deal work. Don’t do it! Move on.

      • What would you say about new investors hooking up with fraudulent lenders? Not necessarily “too good to be true” rates but very reasonable. Pay some upfront fees and wind up loosing the fees and earnest monies?
        Lesson I’ve learned – do more due diligence on lenders! Is there a board here (or elsewhere) to give feedback on lenders? Found out after the fact from a scam warning site about one I used…unfortunately I didn’t know the name until it was too late, was using a local consulting service.

        • BT

          Sorry about your loss.

          Real Estate is a people business and unfortunately their are some bad apples. Don’t let this loss stop you. But also don’t make the same mistake twice

          Good Investing

  3. Good article.
    Not sure if I agree with the 2nd point though. In my opinion a lot of new investors should be spending MORE time playing with numbers and much less time actually looking at properties.
    Not that it is not important to look at properties to get a sense of what is out there, what the local market is like, and get a feel for what repairs might be.
    However that is all nice but the numbers determine a deal not any given home. Lot so new investors fall in love with a house that they go and see and that is when they mess around with numbers with a marginal (at best) deal into something they MUST buy.

    Personally I analysis a ton of properties and usually only go look at them if the numbers justify it as a deal with pretty conservative values (Low ARV, high repairs, low rents, Bad financing terms, ect.).
    In my opinion you are less likley to make money if you look at 5 properties and buy 2 then if you analysis 250 and only buy 1.

    • Shaun,

      I appreciate healthy disagreement. But I actually believe we agree. First we both agree investors have to get out there and get a solid baseline of understanding. Hint most new investors don’t do that.

      Also we both agree that once you have a solid baseline you can start to analyze lots of properties. I love the fact you talk about analyzing 250 to find one. Most new investors can get past reviewing 10 properties.

      Good Feedback and Good Investing

  4. Great article, Mike. You hit the problem right on the head. I’d like to add to the Shooting Star syndrome because I encounter this a lot. In the beginning, instead of new investors trying to set goals on profits made, they should take on activity goals first – properties inspected, contacts made, offers made, etc.

    It gets frustrating when you don’t make money but by focusing on activity, the pressure to make money is reduced and the chances of getting a marginal deal is lessened.

    That said, this means, a new investor should have a good steady income, like a paycheck. so don’t quit your day job just yet.

    • Ronald

      Very well said and I agree. When you start it is about setting good activity goals and working towards them. Once accomplished set new ones.

      In fact I still set activity goals today!!!

      Good Investing

  5. Mike,

    This is an excellent article! I have to admit that as an aspiring investor I have fallen victim to not setting activity goals. As simple as the task may seem, some where along the path I’ve deviated from such a basic and necessary thing! Thanks for the needed wake up call.

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