Landlording & Rental Properties

The 3 Dumbest Mistakes Buy & Hold Real Estate Investors Make

Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
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There is no doubt that even professional long-term real estate investors are prone to the occasional slip-up, so don’t feel down if you make some mistakes. After all, it is all a part of the learning process. However, do keep in mind that it is definitely an error if you consistently repeat these mistakes and fail to learn from them.

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It may just very well be that you haven’t actually made any mistakes so far (which you should), but nevertheless, in order to give you that extra heads up, here are a few of the stupidest slips you could possibly make as a buy and hold investor.

Related: Want to Lose All Your Money & Cry Yourself to Sleep? Make These 4 Newbie Mistakes!

Overpaying

There is definitely a lot of emphasis whizzing around the world of real estate investing on always having to get the best deals if you are a flipper or a wholesaler—and fair enough. In order to be a successful flipper or wholesaler, you will definitely need to be able to get great deals to earn that quick profit.

However, even if you are a long-term investor, this definitely does not mean that you should pay more than you should. After all, having a sky-high mortgage equates to a payment that is far too high, resulting in some serious danger surrounding your cash flow.

Hence, as a buy and hold investor, definitely do take the time to learn the best ways to buy low and snag the top deals. By simply trying to imitate the clever tactics of a flipper or wholesaler, you might just find yourself creating some great immediate equity on your investment!

Money Myths and the Biggest Mistakes Ive Made Raising Capital

Over-Appreciating Appreciation

One of the biggest mistakes that investors make is purchasing rental properties with very minimal (or even negative) cash flow simply based on their unsubstantiated hopes that these properties will appreciate in value. This, however, is an extremely risky move. The market can fluctuate rather quickly, and it is impossible to always accurately predict. So it is strongly encouraged that you never purchase a property with your only profit potential being appreciation.

Related: The Top 3 Real Estate Investing Mistakes I’ve Made (& What I Learned)

In fact, here’s a pro tip. Sometimes the best thing to do is to purchase a property below market value or improve a property to add value. In addition to this, it is a good idea to purchase a property that already has a positive cash flow, as this will allow you to bring in income as soon as you rent out the house.

So, since you are investing for cash flow, don’t worry about home values. If the home value goes down, it doesn’t really matter because you are making money from the cash flow and not the selling of the property. Remember, real estate investing is a long-term play.

Not Treating Landlording as a Business

This might come as a surprise to many, but landlording is actually a business. In order to keep your assets performing, it is best to maintain property upkeep, tenant relations, and finances. So while the majority think that landlording is an easy-going game of handshake agreements, emotion-based choices, and loose regulations, remember that if you want to make it in the long run, you have got to be assertive!

Surely there are more stupid mistakes out there—which ones do you see made all the time?

Leave your comments below!

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling w...
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    Virginia H Rockwell from N Brunswick, New Jersey
    Replied about 2 years ago
    Our mistake was not getting a rock star property manager for our out of state properties. This cost us tens of thousands, multiple court appearances, lawyers and collection agencies, a forclosure, 2 personal loans to cover expenses and many, many sleepless nights. Spend the time it takes to find the very best team! (Btw, we are still dealing with this financial fiasco but we do have a good property manager and we have sold the non- producing properties.)
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 2 years ago
    glad you were able to learn from the lesson. having a solid property manager is key, Virginia!
    Robert Shedden Rental Property Investor from Rockford, IL
    Replied about 2 years ago
    Great read! My wife and I are looking at getting into our first rental property. I’m trying to wrap my head around how to raise capital… my concern is that while I will have a positive cash flow (if I purchase the right property) I will still have all the capital tied up in the property. I’ve read a few articles that suggest flipping a house to generate the capital to get into rentals… but I don’t want to be a newbie at two areas of real estate investing to start off!
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 2 years ago
    you can always refinance at some point and pull most if not all of your cash out. those proceeds can be used to acquire another property.
    John Murray from Portland, Oregon
    Replied about 2 years ago
    I have been in this game a really long time. The way I have made the most money is knowing way more than most. I work harder than most. The combination of knowledge and hard work has served me well. The one last gift was luck, I am luckier than most. If you ask most successful people they will tell you how lucky they are. Most will never complain how tough they had it or how easy it was. We correct and drive on and rarely dwell on the past. Freedom is our drive, not money. This is what we understand more than any other concept.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 2 years ago
    thank you for the input, John. A wise man once said “the harder i work the luckier i get”. sums up most of what you said.
    Megan E Boizot
    Replied almost 2 years ago
    Sterling, Thank you for this article! I am a newbie who is doing extensive research to hopefully start my real estate investing in the near future. This article is short and concise but important factors to keep in mind with my real estate journey. I really appreciate any newbie articles.
    Megan E Boizot
    Replied almost 2 years ago
    Sterling, Thank you for this article! I am a newbie who is doing extensive research to hopefully start my real estate investing in the near future. This article is short and concise but important factors to keep in mind with my real estate journey. I really appreciate any newbie articles.
    David Ingle from Chandler, Arizona
    Replied over 1 year ago
    I”m a Private Wealth Advisor with over 25yrs experience I real estate. We help our client avoid the common mistakes real estate investors make and create financial and investment plans to help them avoid being over-leveraged and maintain adequate liquid reserves. We provide our clients with some of the best loan programs, rates and terms in the country
    Noah Howland Lender from San Francisco, CA
    Replied 1 day ago
    Well said, Sterling! Appreciate your insight.
    Pedro Florentino Investor from Miami, Florida
    Replied 1 day ago
    Good reading, as you mentioned there are many other mistakes. One that I did not make but many newbies make is paying others to fix everything. Knowing how to do simple jobs yourself is key. I have a team of professionals that take care of the heavy lifting, I take care so small jobs; broken faucets, cabinets, painting, etc.