Personal Development

The 5 Biggest Mistakes I’ve Made in My Real Estate Investing Career

Expertise: Business Management, Mortgages & Creative Financing, Landlording & Rental Properties, Real Estate Investing Basics, Personal Finance, Real Estate Deal Analysis & Advice, Commercial Real Estate, Personal Development, Real Estate News & Commentary
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After 30 years of investing in real estate, I’m often asked what my biggest mistakes were or whether I would do anything differently if I could do it all over. The funny thing is that it’s never been the actual real estate itself that proved to be the biggest challenge; it’s usually been something else.

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The 5 Biggest Mistakes I’ve Made in My Real Estate Investing Career

Macro Picture

One thing that I overlooked when I first started out was the macroeconomic picture of the real estate I was investing in and where it was located. By that, I mean I didn’t even really look at things like population and job growth. Looking back now, many of my cash-flowing rentals are in an area that has pretty much peaked—in fact, job growth is pretty stagnant. I just started investing in the county where I lived.

Sure, my numbers worked as far as the rent being more than my payment, but it wasn’t until I started investing nationally and looking at various emerging markets that my perspective shifted. I realized you can swim with the current and invest in a market that’s poised to appreciate with a strong rental market due to increases in things like jobs and population.

newbie-mistake

Going It Alone

To be quite honest, I’m embarrassed to say that I was a bit of a loner for the first 20 years of my real estate investing career. Little did I know that I didn’t know everything, and it wasn’t until I started networking more and joined some real estate groups that my real estate investing business catapulted.

It was from the shared knowledge and strategies. It was like a big brain trust and pool of resources from folks who had already been there and done it (much like BiggerPockets). I do wish I had found those groups and resources earlier.

Related: 10 Lethal Mistakes to Avoid on Your First Real Estate Investment

Starting Late

I’m not sure if it’s ever too late to start investing in real estate. My father was in his early 70s when he bought his first three investment properties, mostly due to my mom not letting him. Although he was handy, she just didn’t want to hear about it. Her father had some rentals in the past and always complained about the tenants.

Years later, after their divorce, Pop finally got some rentals—and he loved it! It actually gave him purpose (and cash flow) in retirement.

For me, I started when I was 29. My initial goal was to acquire one house per year. In a two-year period, I bought 16 houses, and then it quickly rose to 40 units. Next, my goal was 100 houses—but that was before I discovered note investing.

My one buddy had over 150 houses by the time he was 30, but he was also lucky that he started at age 18. Although I wish I had started investing earlier, my next mistake was probably not using the right leverage.

Not Using Leverage

In the beginning, I worked two jobs and then some. My theory was if I worked like an idiot and lived off one job, I could save the rest. What a tough way to get ahead. Yeah, it works, but I wish I knew then what I know now.

I thought you had to save all of the money and then go out and find a deal, but it’s really the other way around. Go find a deal, and the money will find you. If you already have a good deal, just find a money partner, whether it’s private money, hard money, or a traditional bank.

I thought I needed my own money, but this just goes to show that, at the time, I didn’t have enough financial and real estate investing knowledge.

Related: The 3 Dumbest Mistakes Buy & Hold Real Estate Investors Make

There’s an old saying about how it’s better to learn from the mistakes made by others. Of course, you can’t be afraid to try and fail yourself, as long as you learn along the way.

But probably the only time I really lost money was when I gave up control.

wholesaling-mistake

Giving Up Control

What I’m really referring to are those deals I’ve invested in where I didn’t have some type of management control of where the deal would go. Many things can go wrong when investing in real estate, but it’s really the way we react to situations that is most important.

If something throws you for a loop, try to read up on it at first. Then, try to mention your situation to those with more experience, who may have encountered something like it already.

Most importantly, don’t be afraid to ask for help, as well as offer help to others. Over the years, I’ve tried to help others as often as I can, and the karma from that has helped me out tenfold whenever I’ve been in a jam.

We’re republishing this article to help out our newer readers.

So, what are some of your biggest real estate investing mistakes?

Let me know with a comment!

Since 2007, Dave Van Horn has served as president and CEO of PPR The Note Co., a holding company that manages several funds that buy, sell, and hold residential mortgages nationwide. Dave’s expertise is derived from over 30 years of residential and commercial real estate experience as a licensed Realtor, a real estate investor, and a fundraiser. As the latter, Dave has raised over $100 million in both notes and commercial real estate. In addition to his investments and role as CEO, Dave’s biggest passion is to teach others how to share, build, and preserve wealth. He authored Real Estate Note Investing, an introduction to the note investing business, helping investors enter the “other side” of the real estate business.

    David Roberts from Brownstown, Michigan
    Replied over 3 years ago
    Hi Dave, is it wrong to use your own money? It seems like there’s a huge push to always use others money. But is thar because the majority of people dont have money? Just wondering. Personally I have enough to do 2 deals in cash at a time, and a HELOC on primary (banks money i guess in theory), but should i not be using my own, and making flips more expensive for the sake of protecting my cash? Or is it more geared toward not avoiding doing 4 deals at a time if the deal comes, because i only have cash for 3? Thanks for the help. Great article.
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied over 3 years ago
    Hi David, There’s certainly nothing wrong with using your own money, I think what’s really important is when and how you use it. What I think I may have not stressed enough in the article was after reserves, your own capital should always be moving. Your cash is the most valuable to you so you would want it in a relatively safe and liquid/short term investment that offers a good yield. So sure, you’re money is “free” but if you’re using it for an investment that is not what I mentioned above, you have to consider a loss of opportunity cost of your money. Flips can be great investments, but they tie up capital and they’re deals that if they’re good, you can almost always find the capital for them relatively easily. So instead of using your own cash out of pocket, if you were to borrow the money and refinance, you would achieve an infinite rate of return with no cash outlay (while you’re own money is making a return elsewhere). So you’re doing two deals instead of one with the same amount of personal capital. Plus when using borrowed money, you get a write off for the interest you paid. Best, Dave
    David Roberts from Brownstown, Michigan
    Replied over 3 years ago
    I do what you said when i buy a rental. I will pay cash, fix it, then cash out with the bank. I guess if i was going to loan my cash out or use it to buy an off market deal quick, wholesale it off to another investor, it would make sense. But flipping is in my opinion short term. What is short term to u? Days? Weeks? And is it worth it to pay out interest instead of using your own money if u dont have that great deal… I agree that protecting cash is essential Its your lifeline
    Jessie Niu from Columbus, Ohio
    Replied over 3 years ago
    Great article Dave! Could you elaborate how you acquired 16 houses in the first 2 years? That’s a lot for a newbie! What kind of financing did you have? Thanks!
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied over 3 years ago
    Hi Jessie, It wasn’t in the first 2 years, it was actually about 12 or 13 years after I first started that I was doing that. What I meant in the article was that it was just over a 2 year period. My financing was different depending on the deal, some was with bank financing and some was with private financing. By the time I got to that level, I met an investor friendly lender who helped me get more loans. This was a different time of course, now it’s harder to get as many loans in your own name. This is why I always say it makes sense to pay attention to financing, it’s constantly changing and you have to adapt to utilize it to best fit your needs. Best, Dave
    Jerry W. Investor from Thermopolis, Wyoming
    Replied over 3 years ago
    Dave, As usual excellent article. I fit almost every category of where you made mistakes though. I am in the process of making every mistake you outlined. I have 95% invested only locally. I have not networked very much elsewhere, I didn’t get serious about investing until my 50s, I have always waited to buy by saving up money for the down payment or using accumulated equity in other properties, and when I have lost money it was from doing a JV where i gave someone control of one area for a piece of the pie and they didn’t deliver. I am trying to fix one of those now. My biggest problem now is that I am being much more cautious than I was years ago as I have something to lose. It doesn’t help that our local economy has tanked. This article has helped me get insight in how to up my game to a higher level. Thank you again for taking the time to share your experience with us.
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied over 3 years ago
    Hey Jerry, Appreciate the comment as usual! And being cautious is completely understandable, especially with 95% of your product in one area and the local economy tanking. I can definitely relate because I’ve been the same way for some time, in fact I haven’t personally purchased a property in 10 years because of that reason. The local economy has been in the dumps and the refi and rent option has been off the table with Fix and Flips due to the downturn and the amount of mortgages I have in my name. I’m only just starting to look seriously at buying hard Real Estate again. So while I’ve been biding my time, I’ve been better off doing low risk hard money loans (where I’m only into the property for usually 65 cents on the dollar) and buying notes. So I’ve been fortunate enough to be able to try new and different investing strategies in other areas and I can only recommend doing the same. From the sound of it Jerry, assessing the situation means you’re on the right path so keep it up. Onward and upward! Best, Dave
    Daniel Breslin Flipper/Rehabber from Chicago, IL
    Replied over 3 years ago
    Great article and insights Dave-as usual. Keeping management control of a deal is priceless advice. Now that I am also operating in 3 major markets, I’ve had the opportunity to experience many more markets than the original county where we both started investing. I’m going to take the demographic study much more seriously going forward. Thanks Dave!!
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied over 3 years ago
    Thanks for chiming in Dan! It’s funny how people think they can only make money in their own back yard. In your case, 3 markets are certainly better than one and you’re proof of that! Best, Dave
    Mehran K. Investor from Wichita Falls, TX
    Replied over 3 years ago
    Excellent Article, thanks Dave!
    Jim Rice Rental Property Investor from Colorado Springs, CO
    Replied over 3 years ago
    Great article Dave, I always enjoy reading your insight. Are there any specific tools you use to keep aprised of the national picture around job and population growth to help narrow investment areas of opportunities?
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied over 3 years ago
    Hey Jim, I actually now utilize an economist, Spencer Staples of EconAlpha, as a consultant in house to get the bulk of my economic data but I also follow a few others. No one I follow is complete gospel for me but I definitely like a lot of John Mauldin of Mauldin Economics (http://www.mauldineconomics.com/) and economist Harry Dent (http://harrydent.com/). Dent is especially good when it comes to population growth. Best, Dave
    Jim Rice Rental Property Investor from Colorado Springs, CO
    Replied over 3 years ago
    Thanks Dave, greatly appreciated. Sincerely, Jim
    Scott M. Investor from Atlanta, Georgia
    Replied over 3 years ago
    Hi Dave, Where is the best, most up to date, place/site to find national demographic reports ( pop. growth, wage, income, etc) Thanks!
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied over 3 years ago
    Hi Scott, I talk about where I get a lot of my economic data in the answer above. Thanks for commenting! Best, Dave
    John Haley from Ashburn, Virginia
    Replied over 3 years ago
    Awesome Article! Thanks Dave for sharing the knowledge
    John Abbott
    Replied over 3 years ago
    16 houses over a period of two years – not bad! Tell me though, in order to get financed by the banks to buy such a big real estate portfolio, do you need to do it through a company of your own or you simply get the financing as a private person?
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied over 3 years ago
    Hi John, Thanks for commenting. Financing was easier back when I bought the bulk of my properties. I did most of my financing as a private person because it was more lenient then but today I do it as a company. Also, I purchased all of my properties in a variety of ways. Besides buying some in my own name, I bought some in my spouse’s name, some in my mother’s name, and some properties I bought in cash and refinanced. Hope this answer helps. Best, Dave
    Melissa
    Replied over 3 years ago
    Very interesting article! I ´ve just shared it on our Facebook page:)
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied over 3 years ago
    Thanks Melissa!
    Douglas Skipworth Rental Property Investor from Memphis, TN
    Replied over 3 years ago
    We just shared this article with our social media followers. What great lessons for novice and veterans alike! Thanks for being so open and honest, Dave.
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied over 3 years ago
    Thanks Douglas!
    Rodriguez Victor from Eagle Pass, Texas
    Replied over 3 years ago
    Great Article. Kept walking into the wall when the door was next to me. Thanks, Dave
    Jason Barnett Flipper/Rehabber from Memphis TN
    Replied about 2 years ago
    Always enjoy your articles. Thanks Dave.
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied about 2 years ago
    Thanks Jason!
    Jason Barnett Flipper/Rehabber from Memphis TN
    Replied about 2 years ago
    Always enjoy your articles. Thanks Dave.
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied 2 months ago
    Great article! I think most people learn better from seeing the mistakes others have made than just one success story after the other. It also makes it clear that this business isn't just easy money as many of the gurus make it out to be.
    Tom O.
    Replied about 1 month ago
    Good article. But why don't you re-write it to make clear, that you started and then later you bought the 16 houses in a two year period, once you got rolling. I'm seeing a lot of newbies getting into this space and they don't know what they're doing. Don't know how to analyze deals and think it's just so easy because you just start buying stuff. "For me, I started when I was 29. My initial goal was to acquire one house per year. In a two-year period, I bought 16 houses, and then it quickly rose to 40 units. Next, my goal was 100 houses—but that was before I discovered note investing."